The pandemic has been a difficult period for so many industries, but it has been a boon for some. One sector that has thrived is food delivery. The widespread closure of restaurants and mass reduction in dine-in options have made food delivery and takeout as popular as ever. So-called "pandemic stocks" like DoorDash (NYSE:DASH) have grown substantially and played a supportive role for the restaurant industry during challenging times.

DoorDash was established in 2013, and like many tech companies, has its roots in Palo Alto, California. In December of 2020, DoorDash went public on the New York Stock Exchange at an initial price of $175 per share. The stock has traded mostly sideways throughout its first year as a public company and has only gained 16% since its IPO date.

Grocery Delivery

Source: Getty Images

DoorDash and the pandemic trade

DoorDash is the single largest provider of food delivery services in the United States, with an estimated 56% of the market share. The food and convenience industry was in the early innings, but the pandemic greatly accelerated its growth growth. This can be seen in the order trends for the company. Total orders have trended up steadily for the past five quarters, which is an excellent indicator of strength in demand.

DoorDash's total orders have a steady uptrend

Source: DoorDash

It's not just meals that DoorDash is in the business of delivering either. This past year saw the company expand its popular grocery delivery service, which helped consumers who could not leave their houses during the pandemic. Recently, DoorDash also started a partnership with cosmetics and beauty company Ulta (NASDAQ:ULTA) for same-day delivery of its products . This is part of a growing trend of consumer deliveries, as DoorDash steps up its game to compete with the likes of Instacart and Uber (NYSE:UBER)

Can DoorDash keep delivering?

The concern moving forward, of course, is that now that the worst of the pandemic seems to be behind us will DoorDash see headwinds? With restaurants opening back up, the demand for food delivery will likely wane, especially with most areas of North America holding reasonably high vaccination rates.

There has been a strong recovery in restaurant sales

Source: DoorDash

On top of that, with unemployment falling, the company is seeing a shortage of drivers as people return to the office and abandon their side gigs. If the company is forced to offer higher pay and incentives to its drivers, it could eat into the bottom line. Data provided by the company suggests that driving for the firm is rarely the contractor's primary commitment. 

Drivers' outside engagements.

Source: DoorDash

Revenue growth remains strong despite the slowdown

Still, last quarter DoorDash managed to improve its revenues both on a year-over-year and sequential basis, even as the economy was opening back up. In Q2 2021, revenue growth stood at an eye-watering 83% year over year, but the trend is slowing as revenue growth is now being measured against the elevated levels the company reached in the pandemic. 

Revenue Growth Has Been Slowing

Source: DoorDash

With third-quarter earnings right around the corner, investors will be watching to see if it can continue its growth or if the year-over-year comparables will prove to be too difficult to top. The company has gone to great lengths to maintain that high growth is still possible. With the delivery market in North America being rife with competition DoorDash is looking globally for growth. They recently entered the Japanese delivery market and there are promising signs for growth in Europe as well. 

Investors will like to see more new channels like the partnership with Ulta or entries into new markets, but one also has to wonder how much more the company can grow from here. The company often emphasized that they only serve a small portion of the industry, but competition is quite stiff. Uber is present in countries around the world, and on top of that, there are regional delivery services that offer the same business as DoorDash that have established customer loyalty.

The takeaway

With a price-to-book ratio (P/B) of 14.4 and a price-to-sales ratio of 16.84, DoorDash seems expensive. The company is facing stiff competition, and while growth has continued despite the "reopening trade," one has to ask -- how will DoorDash keep the growth story going? There are probably better places to put your money, but if you believe food delivery is here to stay, you may want to keep an eye on DoorDash for a pullback.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.