Yahoo Finance Should You Be Adding Coupang (NYSE:CPNG) To Your Watchlist Today?
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Coupang (NYSE:CPNG). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
Check out our latest analysis for Coupang
Coupang's Improving Profits
In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. Which is why EPS growth is looked upon so favourably. It is awe-striking that Coupang's EPS went from US$0.12 to US$0.71 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Not all of Coupang's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. EBIT margins for Coupang remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 21% to US$26b. That's encouraging news for the company!
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Coupang.
Are Coupang Insiders Aligned With All Shareholders?
Owing to the size of Coupang, we wouldn't expect insiders to hold a significant proportion of the company. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. We note that their impressive stake in the company is worth US$4.0b. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.
It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like Coupang, with market caps over US$8.0b, is about US$14m.
The Coupang CEO received total compensation of just US$1.7m in the year to December 2023. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
Does Coupang Deserve A Spot On Your Watchlist?
Coupang's earnings per share have been soaring, with growth rates sky high. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The sharp increase in earnings could signal good business momentum. Coupang is certainly doing some things right and is well worth investigating. You still need to take note of risks, for example - Coupang has 1 warning sign we think you should be aware of.
Although Coupang certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
