Taking everything into account, TME scores 8 out of 10 in our fundamental rating. TME was compared to 80 industry peers in the Entertainment industry. TME gets an excellent profitability rating and is at the same time showing great financial health properties. TME is growing strongly while it also seems undervalued. This is an interesting combination These ratings could make TME a good candidate for value and growth and quality investing.

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1. Profitability

2. Health

3. Growth

4. Valuation

5. Dividend

1. Profitability

1.1 Basic Checks

In the past year TME was profitable.
TME had a positive operating cash flow in the past year.
In the past 5 years TME has always been profitable.
In the past 5 years TME always reported a positive cash flow from operatings.

1.2 Ratios

With an excellent Return On Assets value of 11.95%, TME belongs to the best of the industry, outperforming 91.25% of the companies in the same industry.
TME has a better Return On Equity (15.93%) than 86.25% of its industry peers.
TME has a Return On Invested Capital of 10.39%. This is amongst the best in the industry. TME outperforms 87.50% of its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for TME is below the industry average of 8.70%.
The last Return On Invested Capital (10.39%) for TME is above the 3 year average (6.52%), which is a sign of increasing profitability.

		Industry Rank	Sector Rank
ROA	11.95%
ROE	15.93%
ROIC	10.39%

ROA(3y)6.45%

ROA(5y)5.99%

ROE(3y)8.75%

ROE(5y)8.04%

ROIC(3y)6.52%

ROIC(5y)5.78%

1.3 Margins

The Profit Margin of TME (34.08%) is better than 100.00% of its industry peers.
In the last couple of years the Profit Margin of TME has grown nicely.
With an excellent Operating Margin value of 28.82%, TME belongs to the best of the industry, outperforming 96.25% of the companies in the same industry.
TME's Operating Margin has improved in the last couple of years.
TME has a Gross Margin of 43.90%. This is comparable to the rest of the industry: TME outperforms 51.25% of its industry peers.
In the last couple of years the Gross Margin of TME has grown nicely.

		Industry Rank	Sector Rank
OM	28.82%
PM (TTM)	34.08%
GM	43.9%

OM growth 3Y43.83%

OM growth 5Y10.87%

PM growth 3Y34.13%

PM growth 5Y8.36%

GM growth 3Y12.05%

GM growth 5Y4.42%

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ROA

ROE

ROIC

Operating and Profit Margin

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2. Health

2.1 Basic Checks

The Return on Invested Capital (ROIC) is just above the Cost of Capital (WACC), so TME is still creating some value.
TME has less shares outstanding than it did 1 year ago.
The number of shares outstanding for TME has been reduced compared to 5 years ago.
Compared to 1 year ago, TME has an improved debt to assets ratio.

2.2 Solvency

TME has an Altman-Z score of 6.12. This indicates that TME is financially healthy and has little risk of bankruptcy at the moment.
The Altman-Z score of TME (6.12) is better than 85.00% of its industry peers.
TME has a debt to FCF ratio of 0.59. This is a very positive value and a sign of high solvency as it would only need 0.59 years to pay back of all of its debts.
Looking at the Debt to FCF ratio, with a value of 0.59, TME belongs to the top of the industry, outperforming 87.50% of the companies in the same industry.
A Debt/Equity ratio of 0.06 indicates that TME is not too dependend on debt financing.
With a decent Debt to Equity ratio value of 0.06, TME is doing good in the industry, outperforming 66.25% of the companies in the same industry.

		Industry Rank	Sector Rank
Debt/Equity	0.06
Debt/FCF	0.59
Altman-Z	6.12

ROIC/WACC1.12

WACC9.28%

2.3 Liquidity

A Current Ratio of 2.09 indicates that TME has no problem at all paying its short term obligations.
TME has a better Current ratio (2.09) than 76.25% of its industry peers.
A Quick Ratio of 2.09 indicates that TME has no problem at all paying its short term obligations.
Looking at the Quick ratio, with a value of 2.09, TME is in the better half of the industry, outperforming 76.25% of the companies in the same industry.

		Industry Rank	Sector Rank
Current Ratio	2.09
Quick Ratio	2.09

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WACC

Debt/Equity

How to determine the health of a company

Altman-Z score

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3. Growth

3.1 Past

The Earnings Per Share has grown by an impressive 36.04% over the past year.
TME shows quite a strong growth in Earnings Per Share. Measured over the last years, the EPS has been growing by 10.88% yearly.
The Revenue has grown by 13.95% in the past year. This is quite good.
The Revenue has been growing slightly by 2.23% on average over the past years.

EPS 1Y (TTM)36.04%

EPS 3Y25.91%

EPS 5Y10.88%

EPS Q2Q%32.76%

Revenue 1Y (TTM)13.95%

Revenue growth 3Y-3.13%

Revenue growth 5Y2.23%

Sales Q2Q%20.64%

3.2 Future

The Earnings Per Share is expected to grow by 16.91% on average over the next years. This is quite good.
The Revenue is expected to grow by 14.77% on average over the next years. This is quite good.

EPS Next Y22.26%

EPS Next 2Y18.33%

EPS Next 3Y16.43%

EPS Next 5Y16.91%

Revenue Next Year15.3%

Revenue Next 2Y14.22%

Revenue Next 3Y13.71%

Revenue Next 5Y14.77%

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 accelerating.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.

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4. Valuation

4.1 Price/Earnings Ratio

Based on the Price/Earnings ratio of 18.44, the valuation of TME can be described as rather expensive.
TME's Price/Earnings ratio is rather cheap when compared to the industry. TME is cheaper than 83.75% of the companies in the same industry.
The average S&P500 Price/Earnings ratio is at 27.32. TME is valued slightly cheaper when compared to this.
The Price/Forward Earnings ratio is 16.27, which indicates a correct valuation of TME.
Compared to the rest of the industry, the Price/Forward Earnings ratio of TME indicates a rather cheap valuation: TME is cheaper than 86.25% of the companies listed in the same industry.
TME's Price/Forward Earnings ratio indicates a valuation a bit cheaper than the S&P500 average which is at 24.32.

		Industry Rank	Sector Rank
PE	18.44
Fwd PE	16.27

4.2 Price Multiples

71.25% of the companies in the same industry are more expensive than TME, based on the Enterprise Value to EBITDA ratio.
TME's Price/Free Cash Flow ratio is rather cheap when compared to the industry. TME is cheaper than 91.25% of the companies in the same industry.

		Industry Rank	Sector Rank
P/FCF	16.71
EV/EBITDA	13.56

4.3 Compensation for Growth

TME's low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
The excellent profitability rating of TME may justify a higher PE ratio.
A more expensive valuation may be justified as TME's earnings are expected to grow with 16.43% in the coming years.

PEG (NY)0.83

PEG (5Y)1.69

EPS Next 2Y18.33%

EPS Next 3Y16.43%

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5. Dividend

5.1 Amount

With a Yearly Dividend Yield of 1.85%, TME has a reasonable but not impressive dividend return.
In the last 3 months the price of TME has falen by -29.96%. A price decline artificially increases the dividend yield. It may be a sign investors do not expect the dividend to last.
Compared to an average industry Dividend Yield of 7.66, TME pays a better dividend. On top of this TME pays more dividend than 88.75% of the companies listed in the same industry.
TME's Dividend Yield is comparable with the S&P500 average which is at 1.83.

		Industry Rank	Sector Rank
Dividend Yield	1.85%

5.2 History

TME does not have a reliable dividend history as it only pays dividend since a couple or years.

Dividend Growth(5Y)N/A

Div Incr Years1

Div Non Decr Years1

5.3 Sustainability

DPN/A

EPS Next 2Y18.33%

EPS Next 3Y16.43%

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TENCENT MUSIC ENTERTAINM-ADR / TME FAQ

What is the fundamental rating for TME stock?

ChartMill assigns a fundamental rating of 8 / 10 to TME.

What is the valuation status of TENCENT MUSIC ENTERTAINM-ADR (TME) stock?

ChartMill assigns a valuation rating of 7 / 10 to TENCENT MUSIC ENTERTAINM-ADR (TME). This can be considered as Undervalued.

How profitable is TENCENT MUSIC ENTERTAINM-ADR (TME) stock?

TENCENT MUSIC ENTERTAINM-ADR (TME) has a profitability rating of 8 / 10.

What are the PE and PB ratios of TENCENT MUSIC ENTERTAINM-ADR (TME) stock?

The Price/Earnings (PE) ratio for TENCENT MUSIC ENTERTAINM-ADR (TME) is 18.44 and the Price/Book (PB) ratio is 2.54.

What is the expected EPS growth for TENCENT MUSIC ENTERTAINM-ADR (TME) stock?

The Earnings per Share (EPS) of TENCENT MUSIC ENTERTAINM-ADR (TME) is expected to grow by 22.26% in the next year.