At US $ 7.98, is it time to put Tencent Music Entertainment Group (NYSE: TME) on your watchlist?
Tencent Music Entertainment Group (NYSE: TME) has seen decent teen-level share price growth on the NYSE over the past few months. With many analysts covering large cap stocks, we can expect any price sensitive announcement to have already factored into the share price. But what if there is still an opportunity to buy? Today, I’m going to analyze the most recent outlook and valuation data from Tencent Music Entertainment Group to see if the opportunity still exists.
Is Tencent Music Entertainment Group Still Cheap?
Good news for investors – Tencent Music Entertainment Group is still trading fairly low under my multiple pricing model, where I compare the company’s price-to-earnings ratio to the industry average. In this case, I used the price-to-earnings (PE) ratio since there isn’t enough information to reliably forecast the stock’s cash flow. I find Tencent Music Entertainment Group’s 21.28x ratio to be lower than its peers average of 29.74x, indicating that the stock is trading at a lower price than the entertainment industry. However, given that Tencent Music Entertainment Group’s stock is quite volatile (i.e. its price movements are amplified relative to the rest of the market), it could mean that the price may go down, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator of stock price volatility.
What does the future of Tencent Music Entertainment Group look like?
NYSE: TME Profit and Revenue Growth September 16, 2021
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. While value investors argue that intrinsic value versus price matters most, a more compelling investment thesis would be high growth potential at a cheap price. Although in the case of Tencent Music Entertainment Group, it is expected to post negative profit growth of -0.7%, which does not help strengthen its investment thesis. The risk of future uncertainty appears to be high, at least in the short term.
What this means for you:
Are you a shareholder? Although TME is currently trading below the industry PE ratio, the outlook for negative earnings brings with it some uncertainty, which equates to higher risk. Determine if you want to increase your portfolio’s exposure to TME, or if diversifying into another stock may be a better decision for your total risk and return.
Are you a potential investor? If you’ve been keeping your eye on TME for a while, but hesitant to take the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is the time to make a decision. But keep in mind the risks that come with negative growth prospects going forward.
If you want to learn more about Tencent Music Entertainment Group as a business, it is important to be aware of the risks it faces. For example, we discovered 1 warning sign that you should run your eye to get a better picture of Tencent Music Entertainment Group.
If you are no longer interested in Tencent Music Entertainment Group, you can use our free platform to view our list of over 50 other stocks with strong growth potential.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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