With a share price of $2.77 and a market capitalization of about $300.0 million, Waitr Holdings Inc (NASDAQ:WTRH) doesn’t get much attention from the financial media. But for investors who want oversized returns—and don’t mind a bit more volatility—Waitr stock deserves a serious look.
Allow me to explain.
Headquartered in Lafayette, LA, Waitr operates an online ordering platform that provides delivery, carryout, and dine-in options. The platform allows customers to discover, order, and receive food and other products from restaurants and grocery stores.
The industry that Waitr Holdings Inc operates in already has several big players, such as DoorDash Inc (NYSE:DASH), Uber Eats—which is part of Uber Technologies Inc (NYSE: UBER)—and GrubHub Inc (NYSE:GRUB). However, unlike these heavyweights that have a huge presence in big cities, Waitr’s operations focus on small and medium-sized markets in more than 700 U.S. cities.
In the company’s own words, it “connects local restaurants to hungry diners in underserved U.S. markets.” (Source: “Corporate Profile,” Waitr Holdings Inc, last accessed April 13, 2021.)
The most recent financials from Waitr basically tells a turnaround story.
In the fourth quarter of 2020, the company generated $46.8 million of revenue, representing an 8.6% increase year-over-year. (Source: “Waitr Reports Fourth Quarter and Full Year 2020 Results,” Waitr Holdings Inc, March 8, 2021.)
The top-line growth may not seem that impressive on its own, but the real highlight was the bottom line.
In the fourth quarter of 2019, Waitr had a net loss of $21.6 million, or a loss of $0.28 per diluted share. In the fourth quarter of 2020, the company earned net income of $2.6 million, or $0.02 per diluted share.
In other words, Waitr Holdings Inc went from incurring a rather substantial loss to earning a net profit, all while growing its sales at a decent clip.
It’s a similar story if you look at the full-year results. In 2019, Waitr Holdings had a loss of $281.3 million, or a loss of $4.00 per diluted share. In 2020, the company had net income of $15.8 million, or $0.15 per diluted share. That’s a bottom-line improvement of $307.1 million!
At the top line, Waitr’s full-year revenue grew from $191.7 million in 2019 to $204.3 million in 2020.
Note that there are bigger players in the industry that are yet to turn a profit, and some of them have been burning through cash. And yet, as Waitr Holdings Inc wrapped up its fourth quarter, it had achieved 11 straight months of consistent profitability and positive operating cash flow. That’s good news for WTRH stock investors.
Now here’s something that could really boost the appeal of Waitr stock: the potential for industry consolidation.
As is the case with most Internet platforms, food delivery app companies want to expand their presence as much as possible. But sometimes expansion, especially in new territories, can be very expensive.
Waitr has built a solid presence in hundreds of small and medium-sized markets in the U.S., it’s profitable, and it has positive operating cash flow. If one of the bigger players in the industry wants to grow its reach, buying Waitr Holdings Inc—which, as I mentioned earlier, has a market cap of about $300.0 million—could be one way to do it.
Waitr Holdings Inc (NASDAQ:WTRH) Stock Chart
Chart courtesy of StockCharts.com
At the end of the day, I’m not saying Waitr Holdings Inc will for sure be an acquisition target. What I am saying is that this is a company in a growing industry that has gone through a turnaround and boasts fairly strong operating metrics.
If there is a buyout in the future, I’d expect a substantial premium over Waitr stock’s current share price.