NETEASE INC-ADR (NASDAQ:NTES) – A GARP Candidate Worth Considering

NETEASE INC-ADR (NASDAQ:NTES) surfaced in our Peter Lynch-inspired screen, highlighting its potential as a long-term growth-at-a-reasonable-price (GARP) investment. The company demonstrates strong fundamentals, sustainable growth, and an attractive valuation. Below, we examine why NTES fits this strategy.

Key Strengths of NTES

• Earnings Growth: NTES has delivered a solid 5-year average EPS growth of 17.51%, aligning with Peter Lynch’s preference for sustainable but not excessive growth (15-30% range).
• Profitability: The company’s return on equity (ROE) stands at 21.41%, well above the 15% threshold Lynch favored, indicating efficient use of shareholder capital.
• Financial Health: With a low debt-to-equity ratio of 0.09 and a strong current ratio of 3.09, NTES maintains a conservative balance sheet, reducing financial risk.
• Valuation: The stock trades at a P/E of 14.84, below both the industry and S&P 500 averages, suggesting it is reasonably priced despite its growth prospects.

Fundamental Analysis Summary

Our full fundamental report rates NTES highly, citing excellent profitability and financial health. Key takeaways:

• High Margins: Operating margin of 28.10% and profit margin of 28.20% outperform most peers.
• Strong Cash Flow: The company generates consistent positive cash flow, supporting dividend payments and reinvestment.
• Dividend Stability: NTES offers a 2.42% dividend yield with a reliable payout history.

While future EPS growth estimates appear weaker, the company’s revenue is still expected to grow at nearly 10% annually, reinforcing its position as a steady compounder.

For more stocks matching the Peter Lynch strategy, explore our Peter Lynch Screen, updated daily.

Disclaimer

This is not investment advice. Conduct your own research before making any financial decisions.