What happened

Shares of JD.com (JD 2.92%) were up 5.5% as of 10:12 a.m. EDT on Thursday as investors expressed optimism about the possibility of tensions easing between the U.S. and China. On Wednesday, President Joe Biden and President Xi Jinping agreed to meet before the end of the year. 

So what

Chinese tech stocks have badly underperformed the broader market this year. On one side, there has been the push in the U.S. to delist Chinese companies that don't comply with auditing procedures. On the other side, top social media and internet giants in China have been under regulatory scrutiny. 

It's worth noting that JD.com has managed to outperform other top Chinese tech stocks lately, including Alibaba (BABA 2.12%), Tencent (TCEHY -0.30%), and Baidu (BIDU -1.78%). Year to date, JD's stock price is down 18.2% at the time of writing, much better than the 30.9% loss for Baidu and 38% loss for e-commerce giant Alibaba.

Person sitting on a couch with a laptop in their lap.

Image source: Getty Images.

The relative outperformance of JD likely stems from its vast physical presence in China, on top of its fast-growing e-commerce and advertising services. This could help the company sidestep any new regulations from Chinese authorities that appear to be primarily targeting big tech platforms. 

Now what

After tumbling to recent lows, JD looks particularly cheap, trading at a price-to-free cash flow ratio of just 20.6. That is awfully low for a business that has grown revenue at a compound annual rate of 33% over the last five years and still has a tremendously long runway for growth in e-commerce.

What's more, JD's increasing operating scale and growth in advertising services is fueling bottom-line growth, with net profit margin steadily improving in recent years. 

Obviously, the tensions between the U.S. and China and the never-ending threat of regulation in China are risks to watch, but the value in JD's shares might be too good to pass up.