It's been a great morning session for NetEase investors, who saw their shares rise 2.9% to a price of $87.98 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
a Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:
NetEase, Inc. engages in online games, music streaming, online intelligent learning services, and internet content services businesses in China and internationally. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 30.01 and an average price to book (P/B) ratio of 3.91. In contrast, NetEase has a trailing 12 month P/E ratio of 14.4 and a P/B ratio of 2.27.
NetEase has moved -27.8% over the last year compared to 29.1% for the S&P 500 — a difference of -56.9%. NetEase has a 52 week high of $118.9 and a 52 week low of $75.85.
Exceptional EPS Growth but Similar Gross Margins to the Industry Average of 62.85%:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $9,768 | $8,509 | $11,290 | $13,747 | $13,991 | $14,573 |
| Gross Margins | 42% | 53% | 53% | 54% | 55% | 61% |
| Net Margins | 10% | 36% | 17% | 19% | 21% | 28% |
| Net Income (M) | $942 | $3,078 | $1,890 | $2,664 | $2,877 | $4,135 |
| Net Interest Expense (M) | $87 | $63 | $113 | $111 | $123 | $148 |
| Depreciation & Amort. (M) | $303 | $375 | $530 | $514 | $414 | $430 |
| Diluted Shares (M) | 3,255 | 3,250 | 3,350 | 3,367 | 3,296 | 3,252 |
| Earnings Per Share | $0.27 | $0.94 | $2.75 | $0.79 | $0.89 | $1.27 |
| EPS Growth | n/a | 248.15% | 192.55% | -71.27% | 12.66% | 42.7% |
| Avg. Price | $47.05 | $48.95 | $78.16 | $101.44 | $92.85 | $88.7 |
| P/E Ratio | 168.04 | 51.53 | 27.91 | 126.8 | 103.17 | 68.76 |
| Free Cash Flow (M) | $1,584 | $2,299 | $3,653 | $3,660 | $3,713 | $4,652 |
| CAPEX (M) | $368 | $174 | $162 | $251 | $305 | $324 |
| Current Ratio | 1.96 | 2.23 | 2.31 | 2.24 | 2.32 | 2.65 |
NetEase has exceptional EPS growth and generally positive cash flows. Additionally, the company's financial statements display an excellent current ratio of 2.65 and growing revenues and a flat capital expenditure trend. Furthermore, NetEase has similar gross margins to its peers.
