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 contrast to all that, I prefer to spend time on companies like JD.com (NASDAQ:JD), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
How Fast Is JD.com Growing Its Earnings Per Share?
In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. You can imagine, then, that it almost knocked my socks off when I realized that JD.com grew its EPS from CN¥4.07 to CN¥33.88, in one short year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.
I like to take a look at earnings before interest and (EBIT) tax 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 33% to CN¥803b. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for JD.com's future profits.
Are JD.com Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$112b company like JD.com. But we do take comfort from the fact that they are investors in the company. Indeed, they have a glittering mountain of wealth invested in it, currently valued at CN¥17b. That equates to 15% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.
Should You Add JD.com To Your Watchlist?
JD.com's earnings have taken off like any random crypto-currency did, back in 2017. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering JD.com for a spot on your watchlist. What about risks? Every company has them, and we've spotted 1 warning sign for JD.com you should know about.
Although JD.com certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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