Here's Why We Think Baozun (NASDAQ:BZUN) Is Well Worth Watching

By
Simply Wall St
Published
June 08, 2021
NasdaqGS:BZUN
Source: Shutterstock

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Baozun (NASDAQ:BZUN). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Baozun

Baozun's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Baozun has managed to grow EPS by 18% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Baozun's EBIT margins were flat over the last year, revenue grew by a solid 24% to CN¥9.3b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NasdaqGS:BZUN Earnings and Revenue History June 8th 2021

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Baozun's forecast profits?

Are Baozun Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Baozun insiders have a significant amount of capital invested in the stock. Indeed, they have a glittering mountain of wealth invested in it, currently valued at CN¥155m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Is Baozun Worth Keeping An Eye On?

For growth investors like me, Baozun's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. It is worth noting though that we have found 2 warning signs for Baozun that you need to take into consideration.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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