If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. To wit, the JD.com, Inc. (NASDAQ:JD) share price is 36% higher than it was a year ago, much better than the market return of around -8.1% (not including dividends) in the same period. That's a solid performance by our standards! The longer term returns have not been as good, with the stock price only 27% higher than it was three years ago.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the last year JD.com grew its earnings per share, moving from a loss to a profit.
We think the growth looks very prospective, so we're not surprised the market liked it too. Generally speaking the profitability inflection point is a great time to research a company closely, lest you miss an opportunity to profit.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how JD.com has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling JD.com stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
It's good to see that JD.com has rewarded shareholders with a total shareholder return of 36% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 3.9% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for JD.com you should be aware of.
We will like JD.com better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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