No. of Recommendations: 10
Ethan,

No MOAT? Have you heard of the network effect? GRUB has the diners on their site, and the restaurants. New entrants can slowly signup restaurants, but will still need diner traffic. It is very difficult to establish yourself in a market where there is already another company with critical mass.

On the other hand, many of the companies you mention can be replaced with better technology offerings. OKTA is an outstanding product, but has many competitors. Centrify is one example. I have used it in my previous and current company. But centrify and OKTA cannot rest on their laurels.

Look into WKDAY if you want to see a company with moat.

Also, GRUB - I am not sure they are paying more and more for acquisitions. Apart from Seamless in 2013 and EAT24 recently, the other acquisitions were quite small. Prove me wrong with numbers. Have you got the data to show how much they paid for recent acquisitions when you make such outlandish claims? If so, post the numbers.


MDB is not the only nosql db company in the world. Same with ZScaler. Hardly the only internet or cloud security company in the world.

Moreover, most of the companies you mention make no money. Forget declining margin, they have negative profit margins.

GRUB had Net margin of 8% in Q3 a year ago and 9.2% in current year Q3. To me that is progress. Sure there were double digit net margin quarters in the past, but nobody here has studied why there was a double digit margin. This isn't a fully mature business yet. 52% revenue growth requires investing into marketing, R&D, etc. Regarding acquisitions, I am all for them buying small players to consolidate their moat. Instead of spending on marketing to enter a new market, if they swallow the competitor whole, that is far better strategy.

ZS for example had 63 Million in revenue last quarter, and 7.5 million net loss. I.e net margin of -11.90%. They Revenue grew slightly faster than GRUB at 57.5% (vs 52% of profitable growth for GRUB), but at the cost of losing 7.5 million. Their growth is coming at an expensive price tag.

GRUB reported $247 million revenue, 9.2% net profit margin sells for $7 billion market cap.
ZS reported $63 million revenue, -11.9% net profit margin, sells for $5 billion market cap.

ZS has to yet prove that their growth in revenue will eventually result in profits. GRUB on the other hand is already growing profitably.
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.