Image source: Getty Images A decade ago, shares in JD Sports (LSE: JD) cost less than 7p each. Since then, the JD Sports share price has risen more than 2,200%. In other words, if I had put £20,000 into the stock 10 years ago, my position would now be closing in on half a million pounds in value, even before taking dividends into account. That sort of share price gain may seem exceptional. But in fact I reckon the retailer’s most profitable days could still be ahead of it. That is why, if I had spare cash to invest today, I would happily add to my existing JD Sports shareholding. Sales machine What drives my optimism is that the company has taken one activity – selling sportswear in the mass market – and refined a business model that enables it do so profitably and in huge volumes. In its Christmas trading update released today, there was more evidence of continued success. The stock market cheered by pushing the shares up around 7% in early trading. Revenues in its organic retail business grew 5% year on year for the first half of the firm’s current financial year. In the 22 weeks to the end of 2022, that revenue growth jumped to 10%. JD changed management last year and a recession is leading consumers to tighten their belts. Those are both risks that could hurt sales. But so far the opposite seems to be happening: JD is going from strength to strength. A decade ago, the company’s sales were £1.3bn. Last year they were £8.6bn. As today’s statement shows, the company continues to report impressive rates of sales growth. Proven profitability Back in 2013, pre-tax profits were £55.1m, around 4.4% of revenue. Last year they were up to £654.7m, which equates to 7.6% of revenues. In other words, over the past decade or so, JD Sports grew its profits over tenfold while substantially increasing its profit margin. Rather than doing what many retailers do and cutting profit margins to boost sales, JD has managed to make much bigger profits overall while also strongly increasing its margins. To me, that reflects its economies of scale and well-honed business model. Both things could help the firm continue to grow earnings in coming years. There are risks, including increased online competition driving down profits. Then again, digital commerce is also an opportunity for the company to grow its own reach globally. That could help drive future growth. Attractive valuation Despite that massive share price growth, I still think the JD Sports price is attractive. That is why I would happily buy it for my portfolio today if I could. The company has a market capitalisation of £7.7bn. On top of that, it ended the first half of its financial year with over £1bn in net cash on its balance sheet. For a consistently profitable company that reported post-tax earnings of £460m last year, that valuation looks cheap to me.
