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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like JD.com (NASDAQ:JD). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
How Fast Is JD.com Growing Its Earnings Per Share?
JD.com has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, JD.com's EPS grew from CN¥15.37 to CN¥28.49, over the previous 12 months. Year on year growth of 85% is certainly a sight to behold.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. JD.com maintained stable EBIT margins over the last year, all while growing revenue 6.8% to CN¥1.2t. That's progress.
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
View our latest analysis for JD.com
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for JD.com?
Are JD.com Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$60b company like JD.com. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth CN¥6.8b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!
Should You Add JD.com To Your Watchlist?
JD.com's earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching JD.com very closely. Of course, just because JD.com is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.