Strong sales growth indicates undervaluation, conservative investors should wait for pullback
Stock: JD.com Inc (JD.OQ)
JD.com, a $55 billion Beijing-based e-commerce company, was recently featured by Barron’s whereby it was projected that shares could gain 30% or more in the next year.
JD.com has performed outstandingly so far this year having generated 52.2% total return vs. the S&P 500 index’s 15.9%.
Having generated profits only in its past quarter in the last ten, JD does not have any trailing PE ratio. Meanwhile, the company has a 1.2x PS ratio (vs. 6.6x peer), and 7.2x PB ratio (vs. 6x peer).
In the recent half, JD.com delivered 42% year over year revenue growth to ¥169.4 billion (Chinese Yuan Renminbi) and losses of ¥257 million vs. ¥1.16 billion a year earlier.
Richard Liu, Chairman, and CEO of JD.com (JD)
“JD’s growing strength as China’s largest retailer continues to position us to capture new and expanding market opportunities.
“As we broaden our range of offerings, including a rapidly growing roster of top international brands, our customer base continues to expand, with female shoppers becoming an increasingly active user base. Looking forward, as JD’s smart technologies and big data help us revolutionize the online shopping experience, our ‘retail as a service’ initiative will further extend the capabilities of our platform to partners throughout China.”
As of June, JD had ¥27.9 billion and ¥29.7 billion in debt (+¥6.4 billion) with debt-equity ratio 0.59x (vs. 0.59x a year earlier). The company’s equity rose ¥11.2 billion year over year to ¥50.4 billion.
JD, in the past three years, allocated ¥12.7 billion in capital expenditures, raised ¥158 million in share issuances, ¥62.4 billion in debt and other financing activities (net repayments), and have generated an accumulated deficit of -¥4.7 billion in free cash outflows.
Meanwhile, 40 analysts have an average recommend of buy with price target of $50.21 (29.4% higher than $38.79 at the time of writing). Using historical revenue growth and PS averages and a 10% margin indicated a per share figure $50.
Disclosure: I do not have shares in JD.com