We all want to get in on the next big winner in a given sector. The question of whether JD.com (JD) could be the future of e-commerce in China and eventually dethrone Alibaba (BABA) is an intriguing one.

After all, JD is a hyper-growth play in a sector that’s growing rapidly. China’s e-commerce market is absolutely massive, with the country accounting for more than half of all global e-commerce sales. In fact, China’s e-commerce market is more than three times larger than that of the United States.

Given those statistics, perhaps the discussion should not be about who will ultimately win out in the competitive Chinese e-commerce space. After all, these data show that there’s tons of room for multiple players in this market.

That said, let’s take a look at how JD stacks up to Alibaba, and why investors may want to get a piece of JD at these levels.

A Tale of Two Growth Gems

Both JD and Alibaba are excellent businesses. Indeed, investors can do very well owning both in this environment.

Taking a look at key metrics for these companies in comparison is a great way to assess the competitive advantages and disadvantages of both. These numbers are trailing, unless otherwise indicated.

JD.com's price-to-sales ratio is .86, and Alibaba's is 5.3. JD.com's price-to- earnings ratio is 44.7, while Alibaba's is 21.9.

As for EV/EBITDA, JD.com's is 42.5, and Alibaba's at 28.7.

Revenue growth of the two companies is close, but Alibaba is still ahead. JD.com's revenue growth is 33.4%, while Alibaba's is 40.7%.

Gross margins of the two companies differ dramatically: JD.com has a gross margin of 7.9%, and Alibaba's is 41.3%.

Clearly, the data is mixed when we compare both companies.

Both JD and Alibaba are strong growth companies from a revenue growth standpoint. Indeed, a 33.4% growth rate shouldn’t be dismissed by any investor. While Alibaba does hold the upper hand in terms of top-line growth as well as margins, it’s important to note that JD is in catch-up mode. As a smaller competitor, JD is sacrificing margins near-term to grow its share of the market.

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Accordingly, investors may want to look at the comparable price/sales metric as the key fundamental metric to assess these companies on with respect to valuation. JD’s lower margins skew the data unfavorably on a price/earnings basis. That said, for a growth stock of this quality, JD still doesn’t look overvalued on this metric either.

Indeed, a price/sales ratio of less than one, for a growth stock of this quality, is obscene. In any other market, JD should be trading significantly higher. It appears the company’s bottom line performance relative to its peers is holding it down.

What Analysts Are Saying About JD Stock

According to TipRanks’ analyst rating consensus, JD stock comes in as a Strong Buy. Out of 17 analyst ratings, there are 15 Buy recommendations and 2 Hold recommendations.

As for price targets, the average analyst JD price target is $102.24, with a potential upside of 43.6%. Analyst price targets range from a low of $80.00 per share to a high of $119.00 per share.

Bottom Line

As far as high-profile growth stocks go, JD remains a top pick for many investors today.

Yes, this is a stock with a lot of hair on it. An unfavorable political climate for Chinese stocks has created a scenario in which investors seem less willing to touch these high-growth plays. Couple this catalyst with the fact that growth stocks have lagged the overall market of late, and investors could have reason to avoid these stocks today.

Nonetheless, for long-term investors looking for a high-quality stock at a discount, JD presents opportunity. For those who can hold through near-term volatility, there is reason to buy this stock on the dip right now.

Disclosure: Chris MacDonald held no position in any of the stocks mentioned in this article at the time of publication.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.

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