Ocado (LSE:OCDO) shares are down 22% over one year, 45% over two years, and 88% over five years. During the last five years, there has not been a good time to buy the stock. But will that change?

Well, here’s a piece of fairly useful information. I really like buying my groceries from Ocado. Our weekly shop appears to come in cheaper than our previous grocers of choice. And it also offers more ‘exciting treats’ than the Morrisons of this world.

When I was much younger and had just started investing my own money, liking a company’s product was an important factor for me in choosing a company. But this proved to be a fatal error. Now, I think the starting point should always be valuation metrics.

Metrics scream ‘stay away’

Ocado’s forward valuation metrics continue to reflect significant financial challenges, with negative earnings and increasing leverage projected through 2027. The company’s price-to-earnings ratio is expected to remain negative across the forecast period. It stands at -7.09 in 2025, -9.89 in 2026, and -15.3 in 2027. 

These negative P/E ratios directly correspond to ongoing net losses, with forecast earnings per share of -£0.36 in 2025, -£0.26 in 2026, and -£0.15 in 2027. Despite some improvement in the scale of losses, Ocado is not anticipated to achieve profitability within this timeframe.

At the same time, Ocado’s net debt is set to increase, rising from £1,146m in 2025 to £1,255m in 2026 and reaching £1,271m by 2027. This growing debt burden will be the result of debt servicing, continued capital expenditure, and negative free cash flow, as the company invests heavily in its technology and fulfilment infrastructure.

Revenue growth is one strong point, moving from £3.2bn in 2024 to a projected £4bn in 2027. However, the combination of persistent negative earnings and rising leverage underscores some serious challenges. While Ocado is getting closer to profitability during the forecasting period, it remains an unconvincing investment proposition.

It’s not just a grocer

Ocado is far more than just a grocer. While many UK consumers know it for its online grocery joint venture with Marks & Spencer, the company’s core business is now built around technology, automation, and logistics solutions for retailers worldwide. Ocado’s proprietary Ocado Smart Platform (OSP) is a sophisticated, end-to-end e-commerce, fulfilment, and logistics system that enables other grocers and retailers to automate their online operations.

In 2024, Ocado’s Technology Solutions generated £496.5m in revenue, growing 18.1%, and delivered £80.9 in adjusted EBITDA (earnings before interest, tax, depreciation, and amortisation) — a 425% increase. Retail remained largest with £2.69bn revenue, up 13.9%, but contributed £44.6m in EBITDA. Logistics solutions added £718 revenue, growing 7.6%, with £31.1m EBITDA. However, it’s important to note that Technology Solutions now drives over half of Ocado’s EBITDA.

I appreciate that Ocado aims to become a global leader in warehouse automation and fulfilment. And it needs to be seen as more than a grocer, because it is. However, its ambition can’t hide the valuation metrics. I simply can’t invest in it.