The financial markets always change, but the world of e-commerce consistently shows dynamism and growth potential. As investors look for opportunities that match changing consumer trends and digital advancements, they focus on these tech-savvy ventures.
With the growing speed of online shopping and a rising preference for digital transactions, the e-commerce sector's growth potential is clear. Research and Markets reports that the global e-commerce market hit $16.6 trillion in 2022 and said it is forecasted to rise to $70.9 trillion by 2028.
Considering the context, investors might think about high-quality e-commerce stocks. However, the criteria for evaluating stocks vary among investors. I used the GuruFocus's All-in-One Screener to examine three key metrics: the forward price-earnings ratio, the three-year revenue growth rate and the three-year free cash flow growth rate. The stocks discussed surpassed the competition based on these three metrics.
As digital shopping shapes consumer habits, focusing on these forward-thinking companies might be wise for investors aiming for short-term stability and long-term value growth.
Alibaba
In the shifting world of e-commerce stocks, Alibaba Group Holidng Ltd. (BABA, Financial) emerges strong despite recent market changes. The stock dipped just over 8% in the last six months, marking it undervalued. But the company's June earnings paint a brighter picture.
Alibaba reported a significant earnings beat, with revenues jumping nearly 14% year over year - their most significant growth since September 2021. Besides top-line growth, the company's net profit margin soared by 32.67%, showcasing efficient financial management. Operational costs were kept in check, evident from the 78.49% rise in operating income. Moreover, the diluted earnings per share grew by a staggering 56.6%, surpassing expectations by 20.10%.
This strong quarter underscores Alibaba's growth in e-commerce and its adaptability in a volatile market. Post the 14% revenue surge, its stock rebound attests to this adaptability.
From a valuation standpoint, Alibaba appears favorable. With a forward price-earnings ratio of 10.82, the stock falls below 72.55% of the companies in the retail - cyclical industry. This industry's price-earnings metrics range from 942.06 at the high end to 3.2 at the low, with a median of 16.12.
Over the past three years, Alibaba has seen a 20.6% growth in revenue per share. This rate puts it ahead of 82.50% of the competition. It emphasizes the compnay's growth and competitive advantage in the e-commerce arena. Additionally, the company boasts an 8% three-year free cash flow growth per share, outpacing 58.14% of companies in the same industry. This growth signifies Alibaba's capability to produce more operational cash, which is crucial for expansion and financial undertakings.
Among promising e-commerce stocks, Alibaba's performance and impressive earnings stand out, highlighting its potential as an undervalued option in the sector.
JD.com
E-commerce stocks have experienced a lot of turbulence this year, yet JD.com Inc. (JD, Financial) is an attractive prospect for investors. Even though its stock has seen a 35.01% decline year to date, an in-depth examination of its recent earnings unveils an enduring growth trajectory.
In the first quarter, the company witnessed a 1.38% year-over-year increase in revenue, reaching 242.96 billion yuan ($33.45 billion). What's particularly striking is its net income, which surged by an astounding 309.33%, hitting 6.26 billion yuan, and its diluted earnings per share grew by 304.17%. These figures underscore JD.com's ability to flourish even in challenging times.
However, JD.com faced a hiccup in March 2023 when its earnings fell short of estimates due to global political sentiments and regulatory decisions impacting Chinese investments. Nonetheless, the company remains proactive. Its alliance with the French luxury group SMCP to unveil flagship stores for brands like Sandro and Maje exemplifies its ambition to diversify and stay competitive.
Despite the broader market's skepticism toward Chinese stocks, JD's current valuation points to it being undervalued. Its forward price-earnings ratio is 12.12, ranking it above 63.73% of its industry counterparts. Moreover, its three-year free cash flow growth rate is an impressive 27.6%, outpacing 77.61% of companies in the retail - cyclical sector. This indicates JD.com's proficiency in yielding surplus cash, with potential avenues for reinvestment or offering rewards to shareholders. Furthermore, JD's three-year revenue growth rate within the same industry is 19.4%, outshining 81.55% of its competitors.
JD.com's strategic plans, combined with recent innovations such as the world's largest intelligent logistics park and its stellar first-quarter results, position it as an undervalued titan in e-commerce. Furthermore, when measured against its competition, the stock clearly stands out. For those investors scouting for a unique opportunity in this vibrant sector, JD.com certainly warrants attention.
