A short time again, JD Sports activities (LSE: JD) seemed like a basic worth share to me. It was promoting for little greater than a pound a share regardless of the corporate’s apparent strengths, starting from a cushty money place on its stability sheet to a widely known model in a number of markets worldwide.

Currently, the JD Sports activities share price has been shifting upwards. It’s now round £1.32. However, regardless of the current upwards momentum, the share price is simply 8% greater than what it was 5 years in the past regardless of the explosive development the corporate has delivered throughout that interval.

So, despite the fact that it might be much less apparent than it was a few months in the past when the price was decrease, might this nonetheless be a worth share for a long-term investor like myself?

Enormous money technology potential

I feel the reply is sure. That explains why I’ve been shopping for the share over the previous yr and don’t have any plans to promote my holding.

At first look, JD Sports activities might not appear to be a lot of a worth share. In spite of everything, its price-to-earnings ratio of 35 will not be low-cost. In reality, that appears excessive. It’s a lot greater than I’d usually think about paying for a share, even one within the FTSE 100 with a monitor report like JD Sports activities has.

However that’s the place understanding how to learn an organization’s accounts turns out to be useful. These earnings are income after tax. the newest full yr’s accounts, these got here in at £227m. However trying greater up the revenue and loss assertion, working earnings topped half a billion kilos.

Tomorrow (31 Could), the corporate will unveil its remaining outcomes for final yr. It has guided the Metropolis to count on revenue earlier than tax and adjusted Gadgets within the vary of £915—£935m.

The corporate is an enormous money generator. Additionally it is persistently worthwhile – but there’s a massive hole between its reported earnings after tax and its revenue earlier than tax and changes. What’s going on?

Funding in development

In brief, JD Sports activities is spending. Tons.

It’s opening a whole lot of latest bodily shops yearly, increasing its already sizeable world presence. That dangers stretching administration too skinny, however it might add scale.

Additionally it is buying rivals to assist strengthen its personal footprint. Final month, for instance, it introduced the proposed takeover of US competitor Hibbett.

That form of spending may help JD Sports activities play to its strengths on a much bigger stage. Nevertheless it additionally explains why I see JD as a worth share.

The retailer might, if it selected to, flip off these spending faucets in brief order and let a bigger proportion of its massive working earnings filter down to the underside line. Doing so may put the brakes on development, however the underlying enterprise is powerful and will energy on with out additional development, in my opinion.

I imagine the long-term worth of JD Sports activities is greater than advised by the present share price, though that’s partly obscured for now by its aggressive and dear enlargement.

Getting that improper is one potential danger. If the Hibbett acquisition doesn’t ship the anticipated  advantages, for instance, it might transform a pricey mistake.

Time will inform – however I proceed to personal the shares and have optimism in regards to the outlook.