Over the past six months, Coupang has been a great trade, beating the S&P 500 by 9.2%. Its stock price has climbed to $28.30, representing a healthy 19.5% increase. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is now still a good time to buy CPNG? Or are investors being too optimistic? Find out in our full research report, it’s free.

Why Does Coupang Spark Debate?

Founded in 2010 by Harvard Business School student Bom Kim, Coupang (NYSE: CPNG) is an e-commerce giant often referred to as the "Amazon of South Korea".

Two Things to Like:

1. Active Customers Skyrocket, Fueling Growth Opportunities

As an online retailer, Coupang generates revenue growth by expanding its number of users and the average order size in dollars.

Over the last two years, Coupang’s active customers, a key performance metric for the company, increased by 11.8% annually to 24.1 million in the latest quarter. This growth rate is strong for a consumer internet business and indicates people love using its offerings.

2. Outstanding Long-Term EPS Growth

Analyzing the change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Coupang’s full-year EPS flipped from negative to positive over the last three years. This is a good sign and shows it’s at an inflection point.

One Reason to be Careful:

Low Gross Margin Reveals Weak Structural Profitability

For online retail (separate from online marketplaces) businesses like Coupang, gross profit tells us how much money the company gets to keep after covering the base cost of its products and services, which typically include the cost of acquiring the products sold, shipping and fulfillment, customer service, and digital infrastructure.

Coupang’s unit economics are far below other consumer internet companies because it must carry inventories as an online retailer. This means it has relatively higher capital intensity than a pure software business like Meta or Airbnb and signals it operates in a competitive market. As you can see below, it averaged a 28.5% gross margin over the last two years. Said differently, Coupang had to pay a chunky $71.48 to its service providers for every $100 in revenue.

Final Judgment

Coupang’s merits more than compensate for its flaws, and with its shares outperforming the market lately, the stock trades at 25.9× forward EV/EBITDA (or $28.30 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

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