$400M Fund Manager Says Forget Tesla, Uber, and DoorDash: These 3 Cheaper Rival Stocks Might Be Better Bargains

Investors often gravitate towards the biggest names in an industry. However, ValueWorks founder Charles Lemonides believes that approach can overlook smaller companies with long-term potential trading at significantly lower valuations.

Lemonides, whose firm manages about $400 million through a hedge fund and other investment strategies, said in an interview with MarketWatch that 'there's a winner-take-all fallacy in certain industries, and there are opportunities among overlooked upstarts.'

He pitched three companies that are yet to dominate their respective industries, but could offer investors more value than the incumbents.

Lyft vs Uber: A Cheaper Ride-Share Play

Lemonides sees Lyft as a potentially cheaper alternative to Uber. According to the FactSet consensus figures cited by the news outlet, Lyft was valued at about 0.7 times forward enterprise value-to-sales, compared with 2.4 times for Uber.

Its forward EV-to-EBIT multiple was also lower, at 18 times versus 14.9 times for Uber, although the EBIT comparison is more nuanced because the companies have different business mixes.

Enterprise value (EV) is a measure of what investors are effectively paying for a company after accounting for debt and cash. It is generally calculated as market capitalisation plus debt minus cash. Meanwhile, EBIT means earnings before interest and taxes, and is commonly used to compare operating profitability without the effects of financing and taxes.

The EV/forward sales ratio is often used to gauge how expensive or cheap a stock is compared with its expected revenue and peers, while the EV/forward EBIT metric measures valuation against expected operating profit. Lower multiples can indicate a cheaper valuation relative to peers, although investors also consider growth, profitability, debt, and business risks before drawing conclusions.

Lemonides described Lyft as more of a 'pure play' with a focused business model. The company operates predominantly in the US ride-sharing market, while Uber has significant international operations and businesses, including delivery and freight.

'Lyft has been growing its top line faster than Uber,' he noted. 'Lyft also has a cleaner balance sheet with $900 million in total debt versus $23.5 billion for Uber.'

FactSet estimates cited in the report projected Lyft's revenue to rise from $4.4 billion in 2023 to $7.4 billion in 2026, a 68% increase. Uber's revenue was projected to rise from $37.3 billion to $57.8 billion over the same period, which is a 55% jump.

Instacart vs DoorDash

Lemonides also favours Maplebear, the company behind Instacart, over the much larger DoorDash from a valuation perspective.

The MarketWatch figures put Instacart's forward EV-to-sales ratio at 2.5 times, compared with 4.1 times for DoorDash. Its forward EV-to-EBIT multiple was 13.1 times, versus 45.9 times for DoorDash. These figures imply that the stock Maplebear trades at much lower valuations to sales and EBIT estimates than DoorDash.

Instacart has traditionally prioritised delivering groceries, while DoorDash mainly delivers prepared food from restaurants. Instacart's core grocery-delivery business also gives it an established infrastructure and customer base that Lemonides believes could be difficult for a new competitor to replicate.

'If you tried to do a grocery business [as] a startup tomorrow, you would have to make a tremendous investment to develop the infrastructure and the people to do it, and then spend a ton on marketing to get a customer base,' he said.

Premium EV Maker Rivian vs Tesla

Lastly, Lemonides compared Rivian with Elon Musk's Tesla.

Rivian's valuation was listed at 1.9 times forward EV-to-sales, compared with 10.7 times for Tesla. Note that Rivian is not expected to generate positive EBIT over the two-year forecast period, so an EV-to-EBIT comparison was not available. Tesla's forward EV-to-EBIT multiple was listed at 190.4 times.

Lemonides sees Rivian's upcoming R2 SUV as a potential catalyst. Rivian currently lists the R2 Standard at a starting price of $44,990, with the Standard version scheduled for 2027.

He argued that Rivian's profitability could improve as R2 production reaches scale, although that remains an investment thesis rather than an established outcome.

Rivian started delivering its R2 SUV to customers during Q2, with forecasts to deliver more than 65,000 vehicles in 2026. It expects to ramp up production capacity at its plant in Normal, Illinois, to 215,000 vehicles, adding potentially another 300,000 in capacity through its plant in Stanto Springs, Georgia.

Lemonides predicted an annualised run rate of 100,000 by 2026-end and 250,000 by the end of 2027 for Rivian vehicle deliveries, adding that profitability comes when R2 scales.

In all, his central argument is straightforward: smaller companies do not necessarily need to dominate their industries to deliver growth, and lower valuation multiples can give investors a different risk-reward profile. However, investors should note that cheaper valuations alone do not guarantee better returns.

Disclaimer: Our digital media content is for informational purposes only and does not constitute investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks, and past performance does not guarantee future returns.