Just Eat shares hot as investors dine on growth story, but is there a downside?

The rapidly expanding company is looking at taking on Uber Eats and Deliveroo

Just Eat is moving into deliveries

JustEat’s growth story is as hot as a Scotch Bonnet chilli. Its earnings, however, look more like the ice cream you’ll need on hand if you try to eat one raw.

The latest trading statement made that clear. Revenues shot up 41 per cent, driven by impressive order growth just about wherever the company has planted its flag. It now expects the full year figure to come in at the top of the City’s forecast range.

When it comes to the profits made on that, however, the reverse is true.

The reason for that isn’t complicated. The company is pouring money into expansion, particularly in Latin America.

It is also parking its tanks on the lawns of the likes of Deliveroo and Uber Eats, which handle deliveries for restaurants, mostly chains, and take a commission from the people that order through them. Just Eat's core business is the channelling of orders to small takeouts, which handle deliveries themselves.

At the end of 2016, however, the company purchased SkipTheDishes, a Canadian food delivery outfit, which has taken it into the new area. Skip is bringing the noise in its home market and seeking to move beyond it. Its service is going to be trialled on these shores.

Just Eat is a wildly successful business with plenty of financial muscle. But it is marching into an already competitive field with this move.

The company is a rarity in the FTSE 100; it’s genuine growth stock that doesn’t pay a dividend and won’t likely do so for some time to come. Such businesses are much more common on Wall Street where revenue growth is the thing.

Yet, while there was some twitching about its update - broker Hargreaves Lansdown described it as ‘hot but perhaps a little sour’ - investors clearly have the appetite for what it’s putting on the table, including its Latin American plans and the globalising of SkipTheDishes.

The shares were some of the tastiest on the market, rising by over six per cent at points during the session. CEO Peter Plumb has thus been given a licence to keep on cooking.

There is a downside to all this, however. Hot competition can be a good thing for the consumer, but when it comes to food deliveries the people who get the dishes from A to B have been getting burned. SkipTheDishes' method of remunerating them is similar to that of Deliveroo and Uber Eats, with self employed couriers moving the food from restaurant to customer for a small fee and tips.

Both Deliveroo and Uber Eats have faced court action and protests from their self employed drivers and riders, who’ve been trying to secure basic rights such as sick pay and the minimum wage. A little less exploitation and a little more regulation of the couriers' conditions, regardless of their employer, would make the heat in the food delivery market a lot easier to swallow.