Grab (NASDAQ:GRAB) has grown its sales by about 48% a year over the past five years, a pace very few companies of its size have matched. In the latest quarter, revenue still rose 22%, which is strong, but the source of that growth is changing.
The business that built Grab is no longer the one growing fastest. Rides grew revenue 12% in the latest quarter. Financial services, a much smaller segment, grew 59%, and the company just agreed to pay $1.49 billion for a majority of a lender called Atome.
Most people know Grab as the app that delivers food and books rides across Southeast Asia. It also lends money and runs digital banks, and a record 54 million people used it each month in the latest quarter. Lending now looks like the part that decides how this stock turns out, because the older businesses are doing their job but growing more slowly. If you’re looking for more growth at a low share price, Grab was one of the names in our report on 13 Best Low Priced Growth Stocks to Invest In Right Now.
Food Delivery and Rides Still Pay the Bills
Food delivery and rides give Grab its scale, and that scale now shows up in profit. Deliveries revenue grew 21% in the latest quarter, well ahead of rides. Adjusted EBITDA margin rose to 16.9% of revenue, and the company called it its eighteenth straight quarter of adjusted EBITDA growth. Management also raised its full-year revenue and adjusted EBITDA forecasts alongside those results.
That is steady growth, but it’s far below the five-year pace of about 48% a year. A company can’t keep compounding that fast on a bigger base, which is why a newer business matters so much.
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Lending Is the Fastest-Growing Business
Lending is growing fast, with the gross loan portfolio up 197% in a year, and Atome would add to it. Grab will pay $1.49 billion in cash, all from its own reserves, for 60% of a consumer lender with a network of more than 30,000 brands. For investors looking to add fintech exposure, our list of 10 Most Promising Fintech Stocks to Buy Now covers more names.
Grab expects the deal to close by the third quarter of 2027 and plans to acquire the rest about two years after that. It says Atome will add to adjusted EBITDA once the deal completes, and it raised its 2028 adjusted EBITDA target.
The Profit Is Bigger Than the Cash
Little of that profit showed up as cash in the latest quarter. Grab reported a profit of $235 million, but operating profit was only $19 million. Operating cash flow was $56 million, lower than a year earlier because of higher working capital needs. The company itself warned that second-half profit will keep swinging with fair value measurements and other items outside day-to-day operations.
Lending also asks for cash before it gives any back. Loans have to be funded first, and some borrowers won’t repay. The Atome payment comes entirely from existing cash, and a new $750 million share buyback draws on the company’s cash too. If you own the stock, the risk is that reported profit looks healthier than the cash behind it.
What the Price Assumes About Lending
On adjusted forward earnings, Grab trades at 21.78 times, above the sector median of 19.02. That multiple rests on adjusted earnings, which leave out some costs. A premium to the sector means the price already leans on lending keeping its pace, since the older businesses alone are growing more slowly. If you’re hunting for growth that looks cheaper, check out 10 Undervalued Growth Stocks to Buy Now.
Rides and delivery built that growth record, and lending will decide the next stretch. The number to watch in the next report is operating cash flow, which needs to rise as the loan book grows.
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This article is originally published at Insider Monkey.
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