Jumia Technologies AG (JMIA) offers an e-commerce platform in Africa, Portugal, Germany, and the United Arab Emirates. The Berlin-based company's platform consists of a marketplace that connects sellers and consumers; a logistics service that enables the shipment and delivery of packages from sellers to consumers; and a payment service that facilitates transactions to participants active on the company's platform in selected markets.
This month, UPS and JMIA established a partnership to provide UPS with access to JMIA's last-mile logistics skills and infrastructure to expand its delivery services in Africa. UPS will provide its clients with an expanded range of delivery alternatives, including door-to-door package delivery and collection, with several payment methods, using Jumia’s infrastructure in Africa. Its shares have gained 19.3% in price over the past month.
However, the stock has plunged 75.5% over the past year and 50% over the past six months. In addition, closing yesterday's trading session at $9.32, the stock is currently trading 75.5% below its 52-week high of $38.06.
Here is what could shape JMIA's performance in the near term:
Poor Bottom line Performance
JMIA's revenue increased 25.8% year-over-year to $62.05 million for the fourth quarter, ended Dec. 31, 2021. However, its operating loss increased 78.3% from its year-ago value to $84.67 million. Its net loss grew 53.2% from the prior-year quarter to $85.03 million. In addition, its cash and cash equivalents declined 68.7% for the year ended Dec. 31, 2021, to $117.09 million. And its net cash used in operating activities grew 100.9% to $63.42 million over this period.
Premium Valuation
In terms of forward Price/Sales, the stock is currently trading at 3.77x, which is 315.9% higher than the 0.91x industry average. Also, its 1.72x forward EV/Sales is 55.1% higher than the 1.11x industry average. Also, JMIA's 5.09x forward Price/Book is 107.4% higher than the 2.45x industry average.
Poor Profitability
JMIA's 0.36% trailing-12-months asset turnover ratio is 65.7% lower than the 1.06% industry average. Its trailing-12-months cash from operations stood at a negative $171.12 million compared to the $159.19 million industry average. Also, its trailing-12-months ROA, net income margin, and ROC are negative 39.3%, 127.4%, and 43.5%, respectively.
POWR Ratings Reflect Uncertainty
JMIA has an F overall rating, which equates to a Strong Sell in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. JMIA has an F grade for Value and Stability. The company's higher-than-industry valuation is consistent with the Value grade. In addition, the stock’s 3.28 beta is in sync with the Stability grade.
Also, it has a D grade for Quality which is justified given its poor profitability.
Among the 71 stocks in the F-rated Internet industry, JMIA is ranked last.
Beyond what I have stated above, you can view JMIA ratings for Momentum, Growth, and Sentiment here.
Bottom Line
Considering Africa's e-commerce sector is mostly untapped, JMIA might generate massive profits in the long term if it can overcome the country's infrastructural issues. However, given Africa's economic instability and JMIA's poor financials, the potential advantages for the continent's untapped market appear doubtful in the near term. In addition, its premium valuation is not in sync with its growth prospects. Therefore, we think the stock is best avoided now.
How Does Jumia Technologies AG (JMIA) Stack Up Against its Peers?
While JMIA has an overall D rating, one might want to consider its industry peers, trivago N.V. (TRVG), which has an overall A (Strong Buy) and Yelp Inc. (YELP), and Travelzoo (TZOO), which have an overall B (Buy) rating.
Note that TRVG is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.
JMIA shares fell $0.32 (-3.43%) in premarket trading Monday. Year-to-date, JMIA has declined -18.25%, versus a -5.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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