NETEASE INC-ADR (NTES) Stock Fundamental Analysis
NASDAQ:NTES - Nasdaq - US64110W1027 - ADR - Currency: USD
NTES gets a fundamental rating of 7 out of 10. The analysis compared the fundamentals against 72 industry peers in the Entertainment industry. NTES scores excellent points on both the profitability and health parts. This is a solid base for a good stock. NTES has a decent growth rate and is not valued too expensively. This makes NTES very considerable for quality investing!
1. Profitability
1.1 Basic Checks
NTES had positive earnings in the past year.
NTES had a positive operating cash flow in the past year.
NTES had positive earnings in each of the past 5 years.
Each year in the past 5 years NTES had a positive operating cash flow.
1.2 Ratios
NTES's Return On Assets of 16.11% is amongst the best of the industry. NTES outperforms 95.83% of its industry peers.
NTES has a better Return On Equity (22.50%) than 90.28% of its industry peers.
The Return On Invested Capital of NTES (17.14%) is better than 93.06% of its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for NTES is significantly below the industry average of 22.90%.
The 3 year average ROIC (14.54%) for NTES is below the current ROIC(17.14%), indicating increased profibility in the last year.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 16.11% | ||
| ROE | 22.5% | ||
| ROIC | 17.14% |
ROA(3y)14.25%
ROA(5y)12.44%
ROE(3y)21.5%
ROE(5y)19.37%
ROIC(3y)14.54%
ROIC(5y)13.18%
1.3 Margins
NTES has a better Profit Margin (30.17%) than 97.22% of its industry peers.
In the last couple of years the Profit Margin of NTES has declined.
With an excellent Operating Margin value of 30.21%, NTES belongs to the best of the industry, outperforming 98.61% of the companies in the same industry.
In the last couple of years the Operating Margin of NTES has grown nicely.
The Gross Margin of NTES (62.71%) is better than 70.83% of its industry peers.
In the last couple of years the Gross Margin of NTES has grown nicely.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 30.21% | ||
| PM (TTM) | 30.17% | ||
| GM | 62.71% |
OM growth 3Y14.45%
OM growth 5Y3.83%
PM growth 3Y13.59%
PM growth 5Y-4.68%
GM growth 3Y5.24%
GM growth 5Y3.25%
2. Health
2.1 Basic Checks
With a Return on Invested Capital (ROIC) well above the Cost of Capital (WACC), NTES is creating value.
NTES has less shares outstanding than it did 1 year ago.
Compared to 5 years ago, NTES has less shares outstanding
The debt/assets ratio for NTES has been reduced compared to a year ago.
2.2 Solvency
The Debt to FCF ratio of NTES is 0.25, which is an excellent value as it means it would take NTES, only 0.25 years of fcf income to pay off all of its debts.
NTES has a Debt to FCF ratio of 0.25. This is amongst the best in the industry. NTES outperforms 90.28% of its industry peers.
A Debt/Equity ratio of 0.07 indicates that NTES is not too dependend on debt financing.
Looking at the Debt to Equity ratio, with a value of 0.07, NTES is in the better half of the industry, outperforming 65.28% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.07 | ||
| Debt/FCF | 0.25 | ||
| Altman-Z | N/A |
ROIC/WACC2.31
WACC7.42%
2.3 Liquidity
A Current Ratio of 3.21 indicates that NTES has no problem at all paying its short term obligations.
Looking at the Current ratio, with a value of 3.21, NTES belongs to the top of the industry, outperforming 87.50% of the companies in the same industry.
NTES has a Quick Ratio of 3.20. This indicates that NTES is financially healthy and has no problem in meeting its short term obligations.
Looking at the Quick ratio, with a value of 3.20, NTES belongs to the top of the industry, outperforming 87.50% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 3.21 | ||
| Quick Ratio | 3.2 |
3. Growth
3.1 Past
NTES shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 9.01%, which is quite good.
Measured over the past years, NTES shows a quite strong growth in Earnings Per Share. The EPS has been growing by 17.51% on average per year.
Looking at the last year, NTES shows a small growth in Revenue. The Revenue has grown by 1.90% in the last year.
The Revenue has been growing by 12.19% on average over the past years. This is quite good.
EPS 1Y (TTM)9.01%
EPS 3Y21.03%
EPS 5Y17.51%
EPS Q2Q%33.66%
Revenue 1Y (TTM)1.9%
Revenue growth 3Y6.32%
Revenue growth 5Y12.19%
Sales Q2Q%7.36%
3.2 Future
Based on estimates for the next years, NTES will show a very negative growth in Earnings Per Share. The EPS will decrease by -26.05% on average per year.
NTES is expected to show quite a strong growth in Revenue. In the coming years, the Revenue will grow by 9.59% yearly.
EPS Next Y8.93%
EPS Next 2Y8.5%
EPS Next 3Y8.63%
EPS Next 5Y-26.05%
Revenue Next Year8.39%
Revenue Next 2Y7.65%
Revenue Next 3Y7.79%
Revenue Next 5Y9.59%
3.3 Evolution
When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is decreasing.
The Revenue growth rate is decreasing: in the next years the growth will be less than in the last years.
4. Valuation
4.1 Price/Earnings Ratio
Based on the Price/Earnings ratio of 16.98, the valuation of NTES can be described as correct.
86.11% of the companies in the same industry are more expensive than NTES, based on the Price/Earnings ratio.
When comparing the Price/Earnings ratio of NTES to the average of the S&P500 Index (26.55), we can say NTES is valued slightly cheaper.
A Price/Forward Earnings ratio of 15.65 indicates a correct valuation of NTES.
Compared to the rest of the industry, the Price/Forward Earnings ratio of NTES indicates a rather cheap valuation: NTES is cheaper than 83.33% of the companies listed in the same industry.
Compared to an average S&P500 Price/Forward Earnings ratio of 22.40, NTES is valued a bit cheaper.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 16.98 | ||
| Fwd PE | 15.65 |
4.2 Price Multiples
77.78% of the companies in the same industry are more expensive than NTES, based on the Enterprise Value to EBITDA ratio.
Based on the Price/Free Cash Flow ratio, NTES is valued cheaply inside the industry as 83.33% of the companies are valued more expensively.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 15.45 | ||
| EV/EBITDA | 10.87 |
4.3 Compensation for Growth
The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates NTES does not grow enough to justify the current Price/Earnings ratio.
The excellent profitability rating of NTES may justify a higher PE ratio.
PEG (NY)1.9
PEG (5Y)0.97
EPS Next 2Y8.5%
EPS Next 3Y8.63%
5. Dividend
5.1 Amount
NTES has a Yearly Dividend Yield of 2.14%.
NTES's Dividend Yield is rather good when compared to the industry average which is at 6.08. NTES pays more dividend than 90.28% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.39, NTES has a dividend comparable with the average S&P500 company.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.14% |
5.2 History
The dividend of NTES has a limited annual growth rate of 4.94%.
NTES has paid a dividend for at least 10 years, which is a reliable track record.
NTES has not decreased its dividend in the last 3 years.
Dividend Growth(5Y)4.94%
Div Incr Years3
Div Non Decr Years3
5.3 Sustainability
36.47% of the earnings are spent on dividend by NTES. This is a low number and sustainable payout ratio.
DP36.47%
EPS Next 2Y8.5%
EPS Next 3Y8.63%
132.97
+1.63 (+1.24%)
Chartmill FA Rating
GICS SectorCommunication Services
GICS IndustryGroupMedia & Entertainment
GICS IndustryEntertainment
Earnings (Last)
Earnings (Next)
Inst Owners12.92%
Inst Owner Change0.7%
Ins OwnersN/A
Ins Owner ChangeN/A
Market Cap85.70B
Analysts83.89
Price Target137.75 (3.59%)
Short Float %2.13%
Short Ratio1.81
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.14% |
Yearly Dividend2.42
Dividend Growth(5Y)4.94%
DP36.47%
Div Incr Years3
Div Non Decr Years3
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)19.52%
Min EPS beat(2)16.21%
Max EPS beat(2)22.83%
EPS beat(4)2
Avg EPS beat(4)6.94%
Min EPS beat(4)-8.86%
Max EPS beat(4)22.83%
EPS beat(8)5
Avg EPS beat(8)11.49%
EPS beat(12)8
Avg EPS beat(12)15.1%
EPS beat(16)11
Avg EPS beat(16)14.48%
Revenue beat(2)0
Avg Revenue beat(2)-2.15%
Min Revenue beat(2)-3.51%
Max Revenue beat(2)-0.78%
Revenue beat(4)0
Avg Revenue beat(4)-3.01%
Min Revenue beat(4)-4.07%
Max Revenue beat(4)-0.78%
Revenue beat(8)0
Avg Revenue beat(8)-3.68%
Revenue beat(12)0
Avg Revenue beat(12)-3.01%
Revenue beat(16)2
Avg Revenue beat(16)-2.09%
PT rev (1m)12.11%
PT rev (3m)13.02%
EPS NQ rev (1m)12.23%
EPS NQ rev (3m)12.23%
EPS NY rev (1m)-0.07%
EPS NY rev (3m)1.29%
Revenue NQ rev (1m)0.34%
Revenue NQ rev (3m)0.34%
Revenue NY rev (1m)0.99%
Revenue NY rev (3m)4.32%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 16.98 | ||
| Fwd PE | 15.65 | ||
| P/S | 5.74 | ||
| P/FCF | 15.45 | ||
| P/OCF | 14.59 | ||
| P/B | 4.28 | ||
| P/tB | 4.28 | ||
| EV/EBITDA | 10.87 |
EPS(TTM)7.83
EY5.89%
EPS(NY)8.5
Fwd EY6.39%
FCF(TTM)8.61
FCFY6.47%
OCF(TTM)9.12
OCFY6.86%
SpS23.16
BVpS31.05
TBVpS31.05
PEG (NY)1.9
PEG (5Y)0.97
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 16.11% | ||
| ROE | 22.5% | ||
| ROCE | 21.36% | ||
| ROIC | 17.14% | ||
| ROICexc | 129.21% | ||
| ROICexgc | 129.21% | ||
| OM | 30.21% | ||
| PM (TTM) | 30.17% | ||
| GM | 62.71% | ||
| FCFM | 37.17% |
ROA(3y)14.25%
ROA(5y)12.44%
ROE(3y)21.5%
ROE(5y)19.37%
ROIC(3y)14.54%
ROIC(5y)13.18%
ROICexc(3y)98.11%
ROICexc(5y)81.85%
ROICexgc(3y)117.55%
ROICexgc(5y)98.29%
ROCE(3y)19.38%
ROCE(5y)17.87%
ROICexcg growth 3Y31.39%
ROICexcg growth 5Y13.28%
ROICexc growth 3Y29.84%
ROICexc growth 5Y14.27%
OM growth 3Y14.45%
OM growth 5Y3.83%
PM growth 3Y13.59%
PM growth 5Y-4.68%
GM growth 3Y5.24%
GM growth 5Y3.25%
F-Score8
Asset Turnover0.53
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.07 | ||
| Debt/FCF | 0.25 | ||
| Debt/EBITDA | 0.28 | ||
| Cap/Depr | 101.06% | ||
| Cap/Sales | 2.2% | ||
| Interest Coverage | 73.54 | ||
| Cash Conversion | 121.57% | ||
| Profit Quality | 123.19% | ||
| Current Ratio | 3.21 | ||
| Quick Ratio | 3.2 | ||
| Altman-Z | N/A |
F-Score8
WACC7.42%
ROIC/WACC2.31
Cap/Depr(3y)107.89%
Cap/Depr(5y)102.75%
Cap/Sales(3y)2.99%
Cap/Sales(5y)3.4%
Profit Quality(3y)118.33%
Profit Quality(5y)132.69%
High Growth Momentum
Growth
EPS 1Y (TTM)9.01%
EPS 3Y21.03%
EPS 5Y17.51%
EPS Q2Q%33.66%
EPS Next Y8.93%
EPS Next 2Y8.5%
EPS Next 3Y8.63%
EPS Next 5Y-26.05%
Revenue 1Y (TTM)1.9%
Revenue growth 3Y6.32%
Revenue growth 5Y12.19%
Sales Q2Q%7.36%
Revenue Next Year8.39%
Revenue Next 2Y7.65%
Revenue Next 3Y7.79%
Revenue Next 5Y9.59%
EBIT growth 1Y15.26%
EBIT growth 3Y21.69%
EBIT growth 5Y16.49%
EBIT Next Year36.07%
EBIT Next 3Y15.89%
EBIT Next 5Y15.16%
FCF growth 1Y53.96%
FCF growth 3Y19.76%
FCF growth 5Y21.96%
OCF growth 1Y44.97%
OCF growth 3Y16.76%
OCF growth 5Y18.17%