DoorDash’s stock price has taken a beating over the past six months, shedding 31.7% of its value and falling to $179.75 per share. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Following the drawdown, is now an opportune time to buy DASH? Find out in our full research report, it’s free.
Why Are We Positive On DASH?
Founded by Stanford students with the intent to build “the local, on-demand FedEx", DoorDash (NASDAQ: DASH) operates an on-demand food delivery platform.
1. Orders Skyrocket, Fueling Growth Opportunities
As a gig economy marketplace, DoorDash generates revenue growth by expanding the number of services on its platform (e.g. rides, deliveries, freelance jobs) and raising the commission fee from each service provided.
Over the last two years, DoorDash’s orders, a key performance metric for the company, increased by 22% annually to 903 million in the latest quarter. This growth rate is among the fastest of any consumer internet business and indicates its offerings have significant traction.
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
DoorDash’s EPS grew at 931% compounded annual growth rate over the last three years, higher than its 27.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Increasing Free Cash Flow Margin Juices Financials
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, DoorDash’s margin expanded by 13 percentage points over the last few years. This is encouraging because it gives the company more optionality. DoorDash’s free cash flow margin for the trailing 12 months was 13.3%.
Final Judgment
These are just a few reasons why we think DoorDash is a great business. With the recent decline, the stock trades at 21.4× forward EV/EBITDA (or $179.75 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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