South Korean e-commerce company Coupang (CPNG 10.76%) joined the U.S. public market in March of 2021, and it has been all downhill for the stock from there, despite the company's strong underlying fundamentals. With the market showing little enthusiasm for Coupang, you might be hesitant to invest in this company.

However, here are three reasons you should consider buying this top growth stock.

1. Fast growing company in a large market

According to market research firm Euromonitor International, South Korea's domestic e-commerce sales reached $196 billion in 2021. And Euromonitor projects the marketplace to grow at a 10.4% compound annual growth rate to reach $291 billion in sales by 2025, making South Korea the third largest e-commerce marketplace in the world.

The image shows the size of Korea's e-commerce and total commerce market.

Image source: Coupang investor presentation.

Coupang's share of e-commerce in this region has increased every quarter since the company has gone public. For example, in the second quarter, Coupang's e-commerce revenues grew 27% year over year and 3% quarter over quarter on a currency-neutral basis. In contrast, South Korea's broader e-commerce market grew 6% year over year and was flat from the previous quarter. Management is confident this trend will continue.

The best part is that although Coupang is over 10 times larger than the second biggest e-commerce player in the country, it only holds a 15.7% market share. Thus, it has plenty of room to continue to grow in South Korea.

2. Coupang is making the turn toward profitability

Since the company's core e-commerce segment generates 97% of its revenue, Coupang recently began disclosing its e-commerce profitability measures separate from its newer, less profitable areas. Consequently, investors now have better insight into the core profitability of the business.

In the second quarter, the e-commerce segment produced $98 million of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), up from $3 million last quarter and a $48 million loss in the year-ago period. EBITDA is a popular metric that makes it easier for investors to compare operating results across different industries and geographies.

The company's overall second-quarter EBITDA came in at $66 million, its first time reporting positive EBITDA as a public company -- impressive considering strong inflation headwinds in the region.

Additionally, on the latest earnings call, management upgraded its 2022 full-year adjusted EBITDA forecast from below $400 million in losses to a positive figure.

Second-quarter e-commerce EBITDA margin came in at 2%, while the company's overall EBITDA margin was 1.3%, up from a negative 2.7% last year. While this rate of improvement likely won't be sustained in every reporting period, management is confident that over time, the company can achieve a consolidated adjusted EBITDA margin of 7% to 10% or higher over the long term.

3. It is expanding its opportunities beyond e-commerce

One of Coupang's core tenets is to prioritize investing in areas that can produce long-term cash flows. As a result, the company has selectively made investments in places that target additional customer spending beyond its current e-commerce marketplace. The new investments include fast-food delivery, video, fintech, and international operations. These investments can potentially increase its total addressable market well beyond the forecasted $290 billion in e-commerce sales by 2025.

Over time, you can measure Coupang's effectiveness in its investment decision-making by watching the company's return on invested capital (ROIC). Ideally, you want to see a mature company produce an ROIC above 2%. However, since Coupang is still a relatively young company with a negative ROIC, what you are looking for is its ROIC trending upward over time. Coupang reported a negative ROIC of 6.7% as of June 2022 -- a significant improvement from negative 56.8% in the same period last year.

Coupang is not immune to COVID-19 after-effects

While Coupang has made tremendous progress, despite the pandemic and high inflation, it is not immune to a global recession, which the International Monetary Fund believes is increasingly likely.

However, the market values Coupang at just 1.5 times trailing sales, a reasonable enough valuation to convince investors to look past the risk of recession.

If you are looking for a hidden gem due for a massive rebound as profitability takes hold and the global economy stabilizes, you should grab a few shares of Coupang while it's down.