So, when comparing one stock to another in a different industry, it’s best make relative comparisons to that stock’s respective industry values. The Historical Cash Flow Growth is the longer-term (3-5 year annualized) growth rate of the cash flow change. Once again, cash flow is net income plus depreciation and other non-cash charges.
The former relies on its social media networking services (mainly WeChat and QQ) and 1.3 billion monthly active users (MAU). As the dominant messaging service in China, Tencent can leverage its user base to offer an ever-expanding catalog of services to improve monetization. It already provides services like payments, gaming, online video, e-commerce, and music and is well-positioned to add new products over time. TikTok owner ByteDance said on Tuesday it is in talks with multiple prospective buyers of its gaming assets, including the world’s largest video games company, Tencent , as the Chinese social media fi… Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation.
- Contrary to the bullish ascending triangle pattern, the descending triangle pattern is a bearish one.
- The Shenzhen-based social media and entertainment conglomerate also controls another 16% stake in Nio’s ADSs through three of its units.
- Current Cash Flow Growth measures the percent change in the year over year Cash Flow.
- There would also be dozens of other segments to discuss, but they are of less importance than those mentioned.
Others will look for a pullback on the week as a good entry point, assuming the longer-term price changes (4 week, 12 weeks, etc.) are strong. A stock with a P/E ratio of 20, for example, is said to be trading at 20 times its annual earnings. In general, a lower number or multiple is usually considered better that a higher one. Value investors will typically look for stocks with P/E ratios under 20, while growth investors and momentum investors are often willing to pay much more. Aside from using absolute numbers, however, you can also find value by comparing the P/E ratio to its relevant industry and its peers. The Price to Book ratio or P/B is calculated as market capitalization divided by its book value.
Bystanders regretting not getting on board the bargain boat could eventually give in and feed the momentum. Take for instance Common Prosperity, which has been painted in a very bad picture as an example of Beijing determined to suck private companies dry. However, watching quality Chinese talk shows targeted at domestic audiences, it was made clear that China recognizes a simple wealth redistribution method is not the solution to Common Prosperity.
Hong Kong Stocks Selloff Takes January Decline to 12%
The 52 Week Price Change displays the percentage price change over the most recently completed 52 weeks (260 trading days). The 4 Week Price Change displays the percentage price change for the most recently completed 4 weeks (20 trading days). The Projected Sales Growth (F1/F0) looks at the estimated growth rate for the current year. It takes the consensus sales estimate for the current fiscal year (F1) divided by the sales for the last completed fiscal year (F0) (actual if reported, the consensus if not). A higher number is better than a lower one as it shows how effective a company is at generating revenue from its assets. A sales/assets ratio of 2.50 means the company generated $2.50 in revenue for every $1.00 of assets on its books.
Growth Scorecard
Even if this does not materialize, the compression of Tencent’s valuation multiples has made the stock attractive. With the suspension of new games approval lifted, it is a matter of time before we see Tencent’s titles getting approved. Every game title of Tencent being approved would be a share price upside driver for TCEHY. Besides being painted with the same stroke by market players for being Chinese, Tencent is also negatively impacted by the poor stock performances of its various investments – many of them are Chinese ADRs – as a holding company. Thus, it isn’t unfair that TCEHY is suffering from the same bearish sentiment ailing the sector. Since this company is able to generate an annual free cash flow of $24 billion and has a net debt of only $1.42 billion, I believe it has the potential to aggressively continue its huge buyback plan.
A D/E ratio of 2 might be par for the course in one industry, while 0.50 would be considered normal for another. So it’s a good idea to compare a stock’s debt to equity ratio to its industry to see how it stacks up to its peers first. Many investors prefer EV to just Market Cap as a better way to determine the value of a company.
Contrarian Outlook: The Bull Case for Top Ranked Chinese Tech Stocks
Within the Finance Sector, it would fall into the M Industry of Banks & Thrifts. And within the M Industry, it might further be delineated into the X Industry group called Banks Northeast. This allows the investor to be as broad or as specific as they want to be when selecting stocks. That means you want to buy stocks with a Zacks Rank #1 https://bigbostrade.com/ or #2, Strong Buy or Buy, which also has a Score of an A or a B. The Zacks Equity Research reports, or ZER for short, are our in-house, independently produced research reports. The industry with the best average Zacks Rank would be considered the top industry (1 out of 265), which would place it in the top 1% of Zacks Ranked Industries.
If a company’s expenses are growing faster than their sales, this will reduce their margins. But note, different industries have different margin rates that are considered good. And margin rates can vary significantly across these different groups.
Those divestments could also boost Tencent’s profits even as its revenue growth stalls out. But for now, analysts still expect Tencent’s revenue and net income to decline by 1% and 55%, respectively, for the full year. Its growth might accelerate in 2023 if its domestic gaming and advertising business stabilize, but I think those are still tall orders in this tough market. This segment’s revenue rose 4% year over year during the quarter and accelerated from its 1% growth in the second quarter. Tencent mainly attributed that recovery to an acceleration in both “online and offline commercial payment activities,” and noted that it was scaling back some of Tencent Cloud’s unprofitable services to strengthen its margins. On advertising, Tencent is expecting a growth recovery in late 2022 while new game releases would juice revenues from this year.
And all of this happens against the background of a huge change in the internet – as it moves from a consumer space where humans gather to argue with strangers and look at kitten photos, to an industrial tool. The Chinese tech titan said that the industrial internet top five cryptocurrencies – used to collect and analyze data – is already emerging and will continue to optimize. Tencent is cautious of China’s stringent norms governing fintech companies. Last year, Tencent’s Tenpay and a dozen other firms were fined for violating consumer protection norms.
Its domestic gaming revenue fell 7% year over year, representing its third consecutive quarter of shrinking revenue, as it grappled with tighter playtime restrictions for minors in China over the past year. Those restrictions also coincided with a temporary suspension on new video game approvals in China, which started last July and ended this April. By the way, domestic games revenues have seen a +5% increase despite the fact that a series of regulations against the use of video games were already passed years ago.
On Friday, China’s central bank announced that it will lower banks’ reserve requirement ratio that determines the amount of deposits banks have to set aside. The move would release 530 billion yuan ($83 billion) of liquidity to spur lending and help businesses. Over the past year, TCEHY stock is down 41% while SE stock is down 56%, despite being up over 40% at one point. Given the execution history of Tencent management, the company could deliver on its strategies and prove the investing community to be too bearish presently. Consequently, five years down the road, we could come to realize that TCEHY stock was actually undervalued rather than overvalued. However, this would be assuming that Tencent is just sitting like a lame duck and unable to mitigate the situation.
Still, there are good reasons to believe that the company can continue to grow — albeit slower — by leveraging its twin engine of the franchise business and external investments. It did not help that one of the central themes from Tencent throughout 2022 was about improving efficiency and controlling costs. In a way, it signaled to investors that the company would unlikely resume the kind of growth it had experienced in the first 16 years since its IPO. After a year of downdraft in TCEHY amid a multitude of bearish issues, it probably doesn’t take much for the market to be excited and once the positive momentum gets going, fear of missing out [FOMO] could quickly propel the stock higher.