CA - Deliveroo: Determining Potential Acquisition Price

2024-07-08 00:52:21 ET

Summary

• UK's Deliveroo saw a price increase of 17% recently, following acquisition talks with the US based and much bigger competitor, DoorDash.
• While the talks have since fallen through, the potential acquisition price is speculatively assessed here based on a comparison with its closest peers in its big UK market.
• While estimates based on EV/Sales and EV/EBITDA indicate a potential 56% upside, that's unlikely to materialise considering that it last traded at these levels in the pandemic-driven boom.
• If it doesn't get sold, its market valuations still don't indicate a price upside, despite its fundamentals looking all right.

When I last wrote about the UK-based food delivery company Deliveroo ( OTCPK:DROOF ) in October last year, its price was up by a notable 45% year-to-date [YTD]. This, coupled with its then elevated market multiples and potential winding down in growth in the foreseeable future, made it a good time for profit taking, leading to a Sell rating on the stock....

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