Tencent Music Entertainment shares fell by -6.8% during the day's afternoon session, and are now trading at a price of $13.21. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
Tencent Music Entertainment Is Fairly Priced:
Tencent Music Entertainment Group operates online music entertainment platforms to provide music streaming, online karaoke, and live streaming services in the People's Republic of China. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.15 and an average price to book (P/B) ratio of 3.11. In contrast, Tencent Music Entertainment has a trailing 12 month P/E ratio of 28.7 and a P/B ratio of 0.34.
Tencent Music Entertainment's PEG ratio is 58.11, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
An Excellent Current Ratio but Similar Gross Margins to the Industry Average of 38.0%:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $18,985 | $25,434 | $29,153 | $31,244 | $28,339 | $27,752 |
| Gross Margins | 38% | 34% | 32% | 30% | 31% | 35% |
| Net Margins | 10% | 16% | 14% | 10% | 14% | 19% |
| Net Income (M) | $1,832 | $3,977 | $4,176 | $3,215 | $3,839 | $5,220 |
| Net Interest Expense (M) | $35 | $64 | $97 | $121 | $108 | $141 |
| Diluted Shares (M) | 6,532 | 6,710 | 6,770 | 6,780 | 6,864 | 6,864 |
| Earnings Per Share | $0.28 | $0.59 | $0.62 | $0.47 | $0.56 | $0.76 |
| Free Cash Flow (M) | $5,632 | $6,200 | $4,885 | $5,239 | $7,481 | $7,337 |
| Current Ratio | 3.33 | 3.17 | 3.3 | 2.56 | 2.27 | 2.49 |
