We've been asking ourselves recently if the market has placed a fair valuation on Tencent Music Entertainment. Let's dive into some of the fundamental values of this Large-Cap Consumer Discretionary company to determine if there might be an opportunity here for value-minded investors.
an Exceptionally Low P/B Ratio but Its Shares Are Expensive:
Tencent Music Entertainment Group operates online music entertainment platforms that provides 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 20.93 and an average price to book (P/B) ratio of 2.93. In contrast, Tencent Music Entertainment has a trailing 12 month P/E ratio of 24.0 and a P/B ratio of 0.41.
Tencent Music Entertainment has moved 98.2% over the last year compared to 19.7% for the S&P 500 — a difference of 78.5%. Tencent Music Entertainment has a 52 week high of $26.7 and a 52 week low of $10.11.
Wider Gross Margins Than the Industry Average of 36.5%:
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $25,434 | $29,153 | $31,244 | $28,339 | $27,752 | $28,401 |
| Gross Margins | 34% | 32% | 30% | 31% | 35% | 42% |
| Net Margins | 16% | 14% | 10% | 14% | 19% | 25% |
| Net Income (M) | $3,977 | $4,176 | $3,215 | $3,839 | $5,220 | $7,109 |
| Net Interest Expense (M) | $64 | $97 | $121 | $108 | $141 | $94 |
| Diluted Shares (M) | 6,710 | 6,770 | 6,780 | 6,864 | 6,864 | 6,196 |
| Earnings Per Share | $0.59 | $0.62 | $0.47 | $0.56 | $0.76 | $1.15 |
| EPS Growth | n/a | 5.084745762711869% | -24.19354838709678% | 19.148936170212785% | 35.7142857142857% | 51.31578947368419% |
| Free Cash Flow (M) | $6,200 | $4,885 | $5,239 | $7,481 | $7,337 | $10,275 |
| Current Ratio | 3.17 | 3.3 | 2.56 | 2.27 | 2.49 | 2.09 |
Tencent Music Entertainment has generally positive cash flows and an excellent current ratio of 2.09. Additionally, the company's financial statements display wider gross margins than its peer group and a strong EPS growth trend.
