2 online businesses with excellent growth prospects

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2 mins. to read
2 online businesses with excellent growth prospects
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Over the next three years, digital commerce transactions across the world are forecast to grow at an annualised rate of over 20%. Greater convenience for consumers and improved technology are shifting a variety of industries towards a digital future at a fast pace. While painful for established players, this could provide a growth opportunity for companies that are already online-focused.

Two examples of such companies are online property listings website Rightmove (LON:RMV) and online takeaway ordering service Just Eat (LON:JE.). The two stocks recently reported results which suggest that they could offer capital growth potential over the long run in my opinion.

Rightmove

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Anyone who has bought or sold a house in recent years will know that the estate agency industry is undergoing a period of rapid change. The days of searching for a property in an estate agent’s window seem to be numbered, with the ease of viewing potential properties online via Rightmove having far more appeal to most consumers.

The company’s recent results suggest that this trend is continuing. Visits to its site in 2018 increased by over 4% to 132 million per month, with time on site up 5% at over 1 billion minutes per month. This helped to boost the company’s revenue and underlying EPS by 10% and 12% respectively. Growth in EPS of 14% is forecast for the 2019 financial year.

Rightmove is the dominant player in the UK online property advertising market, with over one million UK residential properties advertised. Barriers to entry are high, which could provide the stock with an economic moat. Trading on a PEG ratio of 1.9, the stock is not cheap. However, its high growth potential could mean that it delivers strong returns in the long run.

Just Eat

Ordering a takeaway by phone is also likely to become less popular, with Just Eat’s online ordering process being simple and straightforward. It provides an online marketplace so that consumers can access a variety of restaurants and takeaways in their local area through one online location.

The company is investing heavily in new technology to improve the experience for customers, as well as for its partner restaurants. This could provide it with an advantage at a time while the market remains highly competitive. Acquisitions are also helping to diversify its operations, as well as bring new technology into the business. Partnerships with major restaurant chains including McDonald’s and KFC may also broaden its appeal among consumers.


Just Eat’s recent results show that it has ambitious growth plans. It is forecast to post a rise in EPS of 26% in the current year, with further earnings growth potential ahead over the long run as it continues to invest in its operations.

Outlook

Both companies have strong positions in their respective sectors. They are delivering growth and look set to benefit from a tailwind over the long run as consumers continue to favour the convenience of their online offerings. While their growth may be checked by uncertainty and challenges at times, they could represent investment opportunities over the long run.

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