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Meituan Dianping (SEHK: 3690) is an Chinese e-commerce platform for services. The company’s offerings on its platform address customers’ daily needs for food, and also extend further to broader lifestyle and travel services.
Last Friday (22 November), the company’s stock price jumped more than 10% after reporting its third-quarter results for 2019.
There are many reasons that cause stock prices to move after an earnings release. Generally, it is driven either by business performance or investor sentiment.
The former is related to how a business performs in that period, looking at metrics like growth, margins, production, and others. Here, the ultimate driver is profit. The latter is driven more by investors’ overall mood.
In this case of Meituan, I believe the former is the main driver of its share price performance lately. Let’s consider some numbers.
To start with, revenue was up by 44.1% year-on-year while gross profit improved even more, up by 119.8% during the same period. Moreover, the company reported positive adjusted EBITDA and adjusted net profit, turning around its loss-making position around from the same period last year.
Moreover, it also reported strong improvement in non-financial metrics such as number of transacting users and average transaction per user (annually). The former was up by 14.0% year-on-year to 435.8 million for the last 12 months while the latter grew by 16.9% to 26.5 times.
In all, Meituan reported solid numbers in the latest quarter, which explains the upward trajectory of its share price.
Going forward, investors will need to watch closely the company’s ability to sustain its growth, and more importantly, its profitability since both factors will affect the company’s share price movement in the long run.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Lawrence Nga doesn’t own shares in any companies mentioned.