We Ran A Stock Scan For Earnings Growth And Coupang (NYSE:CPNG) Passed With Ease

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Coupang (NYSE:CPNG). 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

Coupang 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. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Coupang's EPS shot from US$0.24 to US$0.59, over the last year. It's not often a company can achieve year-on-year growth of 143%.

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. 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 23% to US$27b. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Fortunately, we've got access to analyst forecasts of Coupang's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Coupang Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$42b company like Coupang. 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. Notably, they have an enviable stake in the company, worth US$4.2b. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations over US$8.0b, like Coupang, the median CEO pay is around US$13m.

The CEO of Coupang only received US$1.7m in total compensation for the year ending December 2023. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Does Coupang Deserve A Spot On Your Watchlist?

Coupang's earnings have taken off in quite an impressive fashion. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The sharp increase in earnings could signal good business momentum. Coupang is certainly doing some things right and is well worth investigating. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Coupang , and understanding this should be part of your investment process.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by significant insider holdings.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.