Provide (LSE:ROO), one of the most celebrated food delivery companies, has seen rapid price growth in recent years. In my opinion, it is one of the most electrifying companies on the market. FTSE250and there is probably still a lot of room for its development.

Given its ambitious international expansion plan and well-thought-out operational strategies, Deliveroo is undoubtedly the best investment to consider for me.

Great potential for future growth

The company currently operates in 12 countries and I am impressed by its agile international strategy. It has entered and exited different markets to optimize results. For example, it has exited Germany, Taiwan, Spain, Australia and the Netherlands, while also entering recent markets such as Kuwait and Qatar.

In addition, to support its growth, Deliveroo is expanding its grocery delivery service. It has already shown powerful results in the UK and the UAE.

It is also expanding into non-food retail, such as toys and electronics. In addition, Deliveroo Hop, its swift grocery delivery service with shorter delivery times and a wider selection of groceries, could attract more customers.

Shares are not inexpensive

While the company has a favorable position in the international market, the stock is definitely not inexpensive. With a price-to-sales (P/S) ratio of 1.21, which is significantly higher than the industry median of 0.64, it is certainly a risk.

But the market has priced the investment high for a reason. Over the past five years, it has delivered very powerful revenue growth, averaging 34%.

In my opinion, the stock is not too high-priced to invest in. However, I certainly will not consider it as a huge allocation in my portfolio if I invest, as there is still a higher risk of volatility due to the P/S ratio.

Its margins could be put to the test

Deliveroo has stern competitors, including Uber He eats and Just eatand has a decline in market share as a result of direct-to-consumer delivery, as Domino’s provides.

The food delivery industry also has low margins, driven by high labor and operating costs. The company currently has a net margin of just 2.6%. Therefore, it also has lower free cash flow. This means it can generate less financial security than you might expect from your investment.

Given the competition, it’s fair to say that Deliveroo could face price pressure in the future. This is also very true at a time when automated deliveries could become commonplace. If management doesn’t get the technology right, it could be undercut on price by other delivery providers that do.

However, this business is still in its infancy and I expect its net margin to improve. The company reported positive free cash flow and profit for the first time in 2024.

I’m waiting for a better quote

Deliveroo is a service I utilize frequently and I believe it is an investment that has a good chance of increasing in value in the long term.

I am definitely bullish on this stock. However, since the valuation is quite high, I have decided not to invest yet. Instead, I will see if it gets cheaper later on; then I will buy my share.