The Deliveroo Plc (LSE:ROO) share price has been at the top of many retail investors’ minds. The Amazon-backed company made headlines with its plans to go public in March 2021 and was valued at around £7.85bn. That makes it one of the biggest companies to go public on London Stock Exchange since 2011.

The delivery business bragged the support of big institutional investors, namely JPMorgan Chase and Goldman Sachs, which were the lead investment banking advisers on the IPO. Therefore, from an investor’s point of view, it seemed like one of the best catches of the market.

However, these expectations didn’t turn into a reality. Disappointing all investors, the share price fell by around 30% during the Deliveroo IPO. The stock price was set at 390p per share but closed the day at 282p, wiping off £2.3bn from its valuation on its first day of trading. And this downward trajectory hasn’t exactly reversed.

To date, Deliveroo shares are following a bearish trend since August 2021. Since then, the company’s stock has declined by an alarming 75% to date. Currently, the stock is trading at 95p despite starting 2022 at 209p. The year-to-date performance of the firm’s stock shows a 55% depreciation.

Needless to say, this doesn’t sound like the stellar investment everyone was expecting. And its current market capitalisation of £1.53bn today, Deliveroo is certainly not close to its former glory. Yet is there a chance for the trend to reverse and the stock price to make a comeback in the long run?

Let’s take a closer look at this business.

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What does Deliveroo do?

Deliveroo is a London-based food delivery company. It operates a hyperlocal three-sided marketplace, connecting local consumers, restaurants & grocers, and riders. It claims to deliver in under 30 minutes and attracted a lot of attention from consumers during the initial days.

Even with its poor performance on the stock market, the company’s fast and reliable delivery network has allowed it to expand hugely. Today, it operates in more than 11 markets worldwide with over 170,000 best-loved restaurants and grocery partners. Moreover, it offers deliveries from 750 premium London hotels thanks to its massive network of 300 freelance drivers.

What makes Deliveroo unique in today’s competitive world is how it has transformed the way consumers order food. Introducing deliveries from restaurants that were previously not making deliveries is what attracted the consumers the most. In addition, the prompt responses to customer demands and concerns have further contributed more towards customer satisfaction and eventually its growth.

Despite what the Deliveroo share price would suggest, the group has expanded itself with a massive workforce of more than 3,000 employees under the leadership of Mr William Shu, who is the founder and Chief Executive Officer.

How is Deliveroo’s financial position?

Even though Deliveroo is not reporting profit, it has reported a good performing first quarter for 2022. Despite a tough comparison base, gross transaction value landed at £1,787m, which has improved by 11% on a year-on-year basis. This is the result of the 18% growth in orders, as reported in the quarterly earnings report.

Another factor contributing to the delivery company’s growth is the expanding consumer base. Deliveroo’s reported an average of 8.1 million monthly active consumers in Q1 2022. That is an outstanding 16% growth on a year-on-year basis and suggests that even with pandemic tailwinds cooling down, the business is still seeing high demand.

Deliveroo is focused on continuous expansion and is determined to expand its network of restaurant partners. At the end of the quarter, Deliveroo reportedly worked with over 160,000 restaurant partner sites.

What are the growth prospects for Deliveroo’s share price?

As an investor, my focus is on the company’s potential growth. On the other hand, the challenge Deliveroo is facing is convincing investors that it can convert that demand into long-term profitability and sizable cash flow.

Amongst its list of partnerships includes Deliveroo Plus’s collaboration with Amazon Prime, which has expanded to France and Italy. In addition, the firm has further expanded Deliveroo Hop, offering grocery delivery in as little as 10 minutes from delivery-only stores operated by the group. The operating metrics of this venture have been very encouraging so far.

And the recent entrance of Deliveroo into the non-food segment is another example of the company’s dedication to maintaining investor confidence. It’s working exclusively with WH Smith to bring 600 products, including stationery, books, and home office items, direct to consumers’ doors in as little as 20 minutes. While testing new waters, Deliveroo has partnered with pharmacy chain Boots, and its results have been very encouraging to date.

Above all, what matters eventually is how much profit the company is making and distributing to its shareholders. Unfortunately, Deliveroo falls behind in both these cases. It’s not generating any profits, nor does it pay any dividends. But Mr Shu is very optimistic about the future. And has set a goal for the business to reach its breakeven point between the second half of 2023 and the first half of 2024 on an adjusted EBITDA basis. Whether this milestone will be hit, only time will tell.

Will I be investing at the current Deliveroo share price?

Deliveroo’s share price is trading near its lowest level since it went public. However, it’s worth mentioning that in just eight years, the company is brushing its shoulders with market leaders like Just Eat and Uber Eats.

The huge plunge in Deliveroo’s share price is alarming to me as an investor. Yet some analysts are starting to change their tone. With analysts setting their price targets at an average of 145p and placing a buy/hold recommendation on the stock.

Combining this with the seemingly solid underlying progress, I must admit that the Deliveroo share price is looking tempting to buy. Therefore, I am considering adding this business to my portfolio today.

Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has published a Premium report on Deliveroo. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and, therefore, may differ from the opinions of analysts in The Money Cog Premium services.