JD.com: Growth stock wrapped in a value stock | news

The proportion of JD.com (WKN: A112ST) is actually quite semi-successful. With a share price of almost EUR 28, we can conclude that the shares have lost only 8.5% of their market value during this year. The slightly different conclusion, however, is that the stock has fallen significantly lower since the record highs.

Nevertheless, if we look solely at the fundamental ratios, we recognize a growth stock as a value stock. The figures for the third quarter of the year have also underlined this once again. As is so often the case, there is a catch.

JD.com: Growth or Value…?!

In fact, JD.com delivered numbers that indicate growth, at least on very important cornerstones. Revenue grew 11.4% year over year to the equivalent of $34.2 billion. In addition, the net income was again clearly profitable at DKK 0.6 billion. It is a very solid starting position. The user base also grew by 6.5% year over year to 588.3 million. We probably don’t need to mention that this is also a strong ecosystem in the Asian region.

If we take a comparative look at the stock’s valuation, it remains on the cheap side. With a market cap of $82.5 billion, the price-to-sales multiple for the year would be less than 1. That’s typically moderate to cheap for growth stocks. Especially since the profitable basis would come to a price-to-earnings ratio of 34.5 with expected annual profits of $2.4 billion. Of course, it’s not the big value grabber. But the margin profile for the Chinese e-commerce and technology group may only be starting to scale.

So what’s the whole point of JD.com’s stock? The market is a little skeptical about the slightly weaker sales growth. fair point. However, overall growth is generally needed in this time of inflation and declining consumer sentiment. More importantly, the market is quite skeptical because there is some regulatory China risk. That’s the real point of why we’re seeing a growth stock masquerading as a value stock here.

Market oriented simply difficult

If we look at JD.com stock from a foolish perspective, the conclusion is relatively simple. We see a strong ecosystem in e-commerce and other digital services. E-health, payment and many new areas are conquered by the management. The logistics are gigantic, of course also expensive if we look at the net result. But it also promotes the quality of online trading.

Crucially, though, the Chinese market isn’t exactly easy for JD.com stock. This is the reason why we see such a fairly value-oriented evaluation here. Of course: This is not the time for growth stocks either, and some DACH e-commerce peers also have similar assessments. However, foolish investors should consider whether the risk is worth the (admittedly good) business opportunity here.

The article JD.com: Growth Stock in a Value Stock Mantle appeared first on The Motley Fool Germany.

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Vincent does not own any of the shares mentioned. The Motley Fool owns shares of and recommends JD.com.

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