Pinduoduo Inc. (NASDAQ:PDD) shareholders might be concerned after seeing the share price drop 26% in the last week. But that doesn't change the reality that over twelve months the stock has done really well. To wit, it had solidly beat the market, up 40%.
Because Pinduoduo is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Pinduoduo grew its revenue by 189% last year. That's stonking growth even when compared to other loss-making stocks. The solid 40% share price gain goes down pretty well, but it's not necessarily as good as you might expect given the top notch revenue growth. So quite frankly it could be a good time to investigate Pinduoduo in some detail. Human beings have trouble conceptualizing (and valuing) exponential growth. Is that what we're seeing here?
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Pinduoduo is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
It's nice to see that Pinduoduo shareholders have gained 40% over the last year. That's better than the more recent three month gain of 7.1%, implying that share price has plateaued recently. It seems likely the market is waiting on fundamental developments with the business before pushing the share price higher (or lower). You could get a better understanding of Pinduoduo's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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