Ocado delivery van

How long before Ocado Group PLC investors get a reality check?

Ocado delivery van

An Ocado delivery van (source: Wikimedia / Waggers)

It’s only taken 15 years for Ocado Group PLC (LON:OCDO) to turn a profit, but the online grocer managed this feat last year, according to the firm’s full-year results, which were published this morning.

Although Ocado did manage to move into the black, it was hardly a banner performance.

Net profit of £7.2m was substantially below consensus forecasts for £12m. and the firm still reported negative cash flow, due to high capex and rising operational costs.

Does this mean that Ocado is now a buy? Hardly, in my view. The online grocer’s shares still seem overvalued on any measure you care to name, and the growth in its cost base last year is pretty shocking.

There are other risks, too: if you’d like to know more, I explained all of these issues in a new article for the Motley Fool this morning, which you can read here.

In the meantime, I remain short of Ocado and am comfortable holding that position in anticipation of a likely reality check later this year.

Disclaimer: This article is provided for information only and is not intended as investment advice. The author has a short position in Ocado Group PLC. Do your own research or seek qualified professional advice before making any investment decisions.

2 thoughts on “How long before Ocado Group PLC investors get a reality check?

  1. John Hool

    I’ve only just seen this article and with the Trading Update due on 10th March I’m wondering what new hype we will hear to divert attention away from the fundamentals.
    The 2nd half of 2014 was break even at best and yet Ocado proudly announce in the Annual Financial Statement that they will have more than 11000 employees by the end of 2015, compared with an average of 7000 in the year to end November 2014. How on earth can a turnover growing by 14% pay for a 25% increase in payroll cost? At £25k per employee, (10% more per person per annum than Morrisons and Sainsbury incidentally), that implies an additional cost of £40m plus in 2015. This is in a business that needs £100m turnover to generate £8m of Operating cash flow and with a capex plan for £150m at the same time
    This seems lunacy to me, but lacking a Goldman Sachs education I’m probably missing something profound

  2. Pingback: 3 reasons why Just Eat may have just peaked | thefiringroom.com

Leave a Reply to John Hool Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.