It hasn't been a great afternoon session for JD.com investors, who have watched their shares sink by -1.4% to a price of $28.55. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
JD.com's Earnings and Assets May Be Undervalued:
JD.com, Inc. provides supply chain-based technologies and services in the People's Republic of China. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.33 and an average price to book (P/B) ratio of 3.12. In contrast, JD.com has a trailing 12 month P/E ratio of 15.3 and a P/B ratio of 0.2.
JD.com's PEG ratio is 26.44, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
The Company Trades Below Its Net Current Asset Value:
| 2017-05-01 | 2018-04-27 | 2019-04-15 | 2020-04-15 | 2021-04-28 | 2022-04-28 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $5,773 | $8,751 | $10,580 | $576,888 | $745,802 | $951,592 |
| Gross Margins | 64.0% | 63.0% | 60.0% | 15.0% | 15.0% | 14.0% |
| Operating Margins | -3% | -13% | -6% | 1% | 1% | 0% |
| Net Margins | -9.0% | -18.0% | -6.0% | 2.0% | 7.0% | 0.0% |
| Net Income (MM) | -$541 | -$1,611 | -$608 | $12,184 | $49,405 | -$3,560 |
| Net Interest Expense (MM) | -$11 | $0 | $47 | -$725 | -$1,125 | -$1,213 |
| Depreciation & Amort. (MM) | -$689 | -$4,193 | -$5,560,034 | -$5,828 | -$6,068 | -$6,232 |
| Earnings Per Share | -$0.39 | -$1.11 | -$0.42 | $8.21 | $15.89 | -$2.36 |
| EPS Growth | n/a | -184.62% | 62.16% | 2054.76% | 93.54% | -114.85% |
| Diluted Shares (MM) | 1,402 | 1,456 | 1,439 | 1,484 | 3,109 | 1,511 |
| Free Cash Flow (MM) | $1,066 | $34,945 | $34,891,977 | $28,458 | $47,451 | $53,946 |
| Capital Expenditures (MM) | -$541 | -$8,089 | -$14,010,555 | -$3,677 | -$4,907 | -$11,645 |
| Net Current Assets (MM) | -$12,222 | -$20,497 | -$5,465 | -$21,464,080 | $34,132 | $49,949 |
| Long Term Debt (MM) | $9,149 | $10,923 | $9,166 | $10,051,782 | $15,790 | $9,386 |
| Net Debt / EBITDA | -3.65 | -3.39 | 0.0 | -4710.41 | -7.81 | -17.86 |
JD.com has exceptional EPS growth, low leverage, and wider gross margins than its peer group. However, the firm has consistently negative margins with a stable trend. Finally, we note that JD.com has weak revenue growth and a flat capital expenditure trend, irregular cash flows, and just enough current assets to cover current liabilities.
