Coupang, Inc. (CPNG) recently made it onto Zacks.com's list of Most Searched Stocks, therefore, it may be advisable to consider some key factors that could impact this stock's performance in the near future.
Over the past month, shares of this company have risen +16.2% compared to a +0.3% change for the Zacks S&P 500 Composite Index. The Zacks Internet – Commerce industry, which Coupang belongs to, has fallen 1.3% during that period. The key question here is, what is the future direction for this stock?
Media announcements or rumors of significant changes in a company's business outlook will usually make the stock “trend” and cause immediate price movements, but there are always some fundamental facts that ultimately drive the buy-and-hold decision.
Earnings forecast revision
At Zacks, we prioritize evaluating the changes in a company's earnings estimates over other factors because we believe the fair value of a stock is determined by the present value of its future earnings stream.
Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings forecasts in light of the latest business trends. When a company's earnings forecast goes up, the fair value of its stock also goes up. And if a stock's fair value is higher than its current market price, investors are more inclined to buy the stock, resulting in an increase in its share price. For this reason, empirical research shows a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
For the current quarter, Coupang is expected to post earnings of $0.02 per share, which would represent a -60% change from the year-ago period. The Zacks Consensus Estimate has changed +50% within the past 30 days.
The consensus revenue estimate for the current fiscal year is -$0.02, indicating a change of -107.7% from last year. This estimate has changed +92.9% over the past 30 days.
Looking at the next fiscal year, the consensus earnings estimate is $0.63, which represents a +3,233.3% change from what Coupang was expected to report a year ago. Over the past month, estimates have changed -10%.
The Zacks Rank, our proprietary stock rating tool that has an impressive outside-audited track record, harnesses the power of earnings estimate revisions to provide a more reliable indicator of near-term stock price movements. The magnitude of the recent change in consensus estimates, along with three other factors related to earnings expectations, has earned Coupang a Zacks Rank of #3 (Hold).
The story continues
The chart below shows the evolution of the company's consensus EPS estimates over the next 12 months.
12 Month EPS
Revenue Growth Forecast
A company's earnings growth is arguably the best indicator of a company's financial health, but nothing happens if the company can't grow earnings. It's nearly impossible for a company to grow its earnings without growing its revenue over the long term. Therefore, knowing a company's earnings growth potential is very important.
For Coupang, the consensus revenue estimate for the current quarter is $7.76 billion, indicating a change of +25.5% year-over-year. For the current and next fiscal years, estimates of $30.57 billion and $36.05 billion indicate changes of +25.4% and +18%, respectively.
Last reported results and surprise history
Coupang reported revenue of $7.32 billion for the most recent quarter, up 25.4% from the same period last year. EPS was $0.07 for the same period, up from $0.08 a year ago.
Compared to the Zacks Consensus Estimate of $7.29 billion, reported revenues represented a surprise of +0.43%. EPS surprise was +600%.
Over the last four quarters, Coupang has surpassed consensus EPS estimates two times, and the company also topped consensus revenue estimates each time during that period.
evaluation
No investment decision can be made efficiently without taking into account stock valuation. Whether a stock's current price properly reflects the intrinsic value of its business and the company's growth prospects is a key factor in determining future stock price movements.
Comparing the current value of a company's valuation multiples such as Price to Earnings (P/E), Price to Sales (P/S), Price to Cash Flow (P/CF) with its historical values helps in identifying whether the stock is fairly valued, overvalued or undervalued. Also, comparing a company with its peers based on these parameters gives a good idea of how reasonably priced its stock is.
The Zacks Value Style Score, a part of the Zacks Style Scores system, evaluates both traditional and non-traditional metrics, categorizes stocks into five groupings from A to F (A is better than B, B is better than C, etc.) to help identify whether stocks are overvalued, fairly valued or temporarily undervalued.
On this score, Coupang is rated a B, indicating that it is trading at a discount relative to its peers. Click here to see the values of some of the valuation metrics that drove this rating.
Conclusion
The facts discussed here, and many other information on Zacks.com, may help you decide whether the market buzz surrounding Coupang is worth following, however, its Zacks Rank #3 suggests that Coupang is likely to perform in line with the overall market in the near term.
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Coupang, Inc. (CPNG) : Free Stock Analysis Report
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