Does JDcom Inc’s (JD) 75.3% Earnings Growth Make It An Outperformer?
After looking at JDcom Inc’s (NASDAQ:JD) latest earnings announcement (30 September 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether JD.com’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for JD
Were JD’s earnings stronger than its past performances and the industry?
To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This allows me to analyze various companies on a similar basis, using the latest information. JD.com’s most recent bottom-line -CN¥2,042M, which, relative to the prior year’s figure, has become less negative. Since these values may be relatively nearsighted, I have computed an annualized five-year value for JD.com’s net income, which stands at -CN¥6,202M. This suggests that, though net income is negative, it has become less negative over the years.
Additionally, we can assess JD.com’s loss by looking at what has been happening in the industry on top of within the company. Firstly, I want to briefly look into the line items. Revenue growth over past few years has rose by 36.06%, implying that JD.com is in a high-growth phase with expenses shooting ahead of high top-line growth rates. Viewing growth from a sector-level, the US internet and direct marketing retail industry has been growing its average earnings by double-digit 38.51% over the prior twelve months, and a less exciting 6.76% over the previous few years. This means even though JD.com is presently loss-making, it may have benefited from industry tailwinds, moving earnings towards to right direction.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to envisage what will happen in the future and when. The most useful step is to assess company-specific issues JD.com may be facing and whether management guidance has steadily been met in the past. I recommend you continue to research JD.com to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for JD’s future growth? Take a look at our free research report of analyst consensus for JD’s outlook.
2. Financial Health: Is JD’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
