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It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like Coupang (NYSE:CPNG), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
See our latest analysis for Coupang
Coupang's Improving Profits
In the last three years Coupang's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Outstandingly, Coupang's EPS shot from US$0.24 to US$0.57, over the last year. It's not often a company can achieve year-on-year growth of 138%.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. It's noted that Coupang's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Coupang maintained stable EBIT margins over the last year, all while growing revenue 25% to US$29b. That's encouraging news for the company!
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Coupang's future EPS 100% free.
Are Coupang Insiders Aligned With All Shareholders?
Since Coupang has a market capitalisation of US$40b, we wouldn't expect insiders to hold a large percentage of shares. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$3.6b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!