JD.com vs The Market

JD.com (NASDAQ:JD) shareholders have experienced further losses as the company's stock declined by 5.5% over the past week, leading to one-year losses of 40%. While investing in index funds provides a simple way to benefit from a rising market, active investors seek stocks that outperform the market.

Unfortunately, JD.com has significantly underperformed, with its share price sliding 41% over the past twelve months, compared to the market decline of 1.0%. Over the last three years, shareholders have also faced a challenging period, with the share price down by 40%. The recent months have seen a rapid acceleration in the decline, with a 28% drop in the last three months alone.

Some Red Flags

Warren Buffett's essay on "The Superinvestors of Graham-and-Doddsville" highlights the irrationality of share prices in reflecting a company's value. Comparing earnings per share (EPS) with the share price can provide insights into how sentiment around a company has changed.

In the past 12 months, JD.com managed to improve its earnings per share from a loss to a profit. This significant improvement should be viewed positively, raising questions as to why the market has sold down the shares. If the trend of improved profitability continues, now might be the opportune time to consider adding JD.com to your watchlist.

To gain a comprehensive understanding of JD.com's future prospects, it is essential to examine its financial position and how it has evolved over time.

A different perspective reveals that while the broader market experienced gains of approximately 1.0% in the last year, JD.com shareholders incurred a significant loss of 40%, even when factoring in dividends. Although even good stocks can experience price drops, it is crucial to see improvements in fundamental metrics before considering further investment.

JD.com Performance

JD.com's performance over the past year indicates unresolved challenges, as it fared worse than the annualized loss of 2% over the last five years. While long-term share price weakness can be concerning, contrarian investors may wish to conduct further research in the hopes of a potential turnaround. Evaluating JD.com requires considering various factors beyond share price performance.

JD.com continues to face challenges with its declining stock and significant shareholder losses. However, the recent improvement in earnings per share highlights the potential for a positive turnaround. Investors should conduct a thorough analysis of the company's financial position and monitor its future performance before making any investment decisions.