Is Now The Time To Put PDD Holdings (NASDAQ:PDD) On Your Watchlist?
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
In contrast to all that, many investors prefer to focus on companies like PDD Holdings (NASDAQ:PDD), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
See our latest analysis for PDD Holdings
How Fast Is PDD Holdings Growing Its Earnings Per Share?
Over the last three years, PDD Holdings has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. PDD Holdings' EPS skyrocketed from CN¥22.78 to CN¥34.77, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 53%.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for PDD Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 68% to CN¥199b. That's progress.
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for PDD Holdings?
Are PDD Holdings Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$163b company like PDD Holdings. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth CN¥55b. That equates to 34% of the company, making insiders powerful and aligned with other shareholders. Looking very optimistic for investors.
Is PDD Holdings Worth Keeping An Eye On?
For growth investors, PDD Holdings' raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in PDD Holdings' continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. You should always think about risks though. Case in point, we've spotted 1 warning sign for PDD Holdings you should be aware of.
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 recent insider purchases.
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.
