Here are 1 ftse 250 stock expanding that would not touch with a 10 -foot bargepole

Delivery (LSE: Roo) could be one of the great success stories of the 21st century of the United Kingdom. It was only formed in 2013, but registered income of £ 2 billion last year and has already reached Ftse 250. The firm offers a million meals a week up and down from the country and has also expanded in Europe and Asia.

All distinctive stamps of a prosperous business are present and, nevertheless, I will not touch the actions with a quite long bargepole. Here is why.

Growth is needed

To begin with, billions in income does not mean that money really earns. And the lack of profits has been a subject of Deliveroo operations so far. Okay, he got profits last year for the first time and dividends are already mentioned. But the company is quoted 45 times the earnings to progress. That is not a good purchase for me without a large part of the growth of profits.

Now, one could say, many non -profitable companies continue to be excellent purchases. This is really true. I remember seeing Reddit The OPI last year has not achieved a penny since 2008. But it obtained a couple of quarters later and the actions have increased approximately four times in value since then. That is often the story with these incipient and tomorrow. I accept that it could be the case with delivery.

Where things begin to fall for me is the business model. The price of Woo is around £ 3 per order. That is an acceptable amount to deliver food, but is there room for increases to increase profits? I think that while an increase in the rate could help increase profits, there is also the risk of determining some customers and the company has not suggested that it is even considering such an increase. That is understandable, since surely people would not want to pay much more to send me a couple of Poke Bowls Hawaians (the most popular order of the company, by the way). “

Regulatory problems

On the other side of things, I don't think there is a lot of fat to trim from operations. The firm is based on cheap labor in a sector with a lot of competition. With other great delivery services that compete for business, it is difficult to see a lot of space for the expansion of the margin here either.

There is also the issue of regulation to take into account that it is always a threat in these operations of economy types of nascent concerts.

In general, there are many questions here. Can Deliveroo deliver (ahem) about the growth of profits or win the market share against competition? Can you avoid regulatory hammer? Maybe management has all the answers, the stock flies and looked back in 10 years with egg on my face.

I wouldn't be too surprised. The promotion of the company has so far been exceptional. It has millions of regular customers and other investors are putting intoxicating assessment in the shares. In any case, today it is not a purchase for me.