Overall TME gets a fundamental rating of 8 out of 10. We evaluated TME against 80 industry peers in the Entertainment industry. TME scores excellent points on both the profitability and health parts. This is a solid base for a good stock. An interesting combination arises when we look at growth and value: TME is growing strongly while it also seems undervalued. This makes TME very considerable 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.
In the past year TME had a positive cash flow from operations.
In the past 5 years TME has always been profitable.
Each year in the past 5 years TME had a positive operating cash flow.

1.2 Ratios

TME has a better Return On Assets (11.95%) than 91.25% of its industry peers.
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 8.74%.
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.
TME's Profit Margin has improved in the last couple of years.
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.
Looking at the Gross Margin, with a value of 43.90%, TME is in line with its industry, outperforming 51.25% of the companies in the same industry.
TME's Gross Margin has improved in the last couple of years.

		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

TME has a Return on Invested Capital (ROIC), which is just above the Cost of Capital (WACC), which means it is creating some value.
Compared to 1 year ago, TME has less shares outstanding
The number of shares outstanding for TME has been reduced compared to 5 years ago.
TME has a better debt/assets ratio than last year.

2.2 Solvency

An Altman-Z score of 6.37 indicates that TME is not in any danger for bankruptcy at the moment.
With an excellent Altman-Z score value of 6.37, TME belongs to the best of the industry, outperforming 88.75% of the companies in the same industry.
The Debt to FCF ratio of TME is 0.59, which is an excellent value as it means it would take TME, only 0.59 years of fcf income to pay off all of its debts.
With an excellent Debt to FCF ratio value of 0.59, TME belongs to the best 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.
TME has a better Debt to Equity ratio (0.06) than 66.25% of its industry peers.

		Industry Rank	Sector Rank
Debt/Equity	0.06
Debt/FCF	0.59
Altman-Z	6.37

ROIC/WACC1.21

WACC8.57%

2.3 Liquidity

TME has a Current Ratio of 2.09. This indicates that TME is financially healthy and has no problem in meeting its short term obligations.
Looking at the Current 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.
TME has a Quick Ratio of 2.09. This indicates that TME is financially healthy and has no problem in meeting its short term obligations.
With a decent Quick ratio value of 2.09, TME is doing good in 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.
Looking at the last year, TME shows a quite strong growth in Revenue. The Revenue has grown by 13.95% in the last year.
Measured over the past years, TME shows a small growth in Revenue. The Revenue has been growing by 2.23% on average per year.

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 Y22.58%

EPS Next 2Y18.33%

EPS Next 3Y16.49%

EPS Next 5Y16.91%

Revenue Next Year15.31%

Revenue Next 2Y14.21%

Revenue Next 3Y13.69%

Revenue Next 5Y14.77%

3.3 Evolution

The EPS growth rate is accelerating: in the next years the growth will be better than in the last years.
The Revenue growth rate is accelerating: in the next years the growth will be better than in the last years.

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4. Valuation

4.1 Price/Earnings Ratio

The Price/Earnings ratio is 19.80, which indicates a rather expensive current valuation of TME.
Based on the Price/Earnings ratio, TME is valued cheaply inside the industry as 82.50% of the companies are valued more expensively.
Compared to an average S&P500 Price/Earnings ratio of 28.82, TME is valued a bit cheaper.
With a Price/Forward Earnings ratio of 17.43, TME is valued on the expensive side.
Based on the Price/Forward Earnings ratio, TME is valued cheaply inside the industry as 86.25% of the companies are valued more expensively.
TME's Price/Forward Earnings ratio indicates a valuation a bit cheaper than the S&P500 average which is at 25.95.

		Industry Rank	Sector Rank
PE	19.8
Fwd PE	17.43

4.2 Price Multiples

70.00% of the companies in the same industry are more expensive than TME, based on the Enterprise Value to EBITDA ratio.
Based on the Price/Free Cash Flow ratio, TME is valued cheaper than 88.75% of the companies in the same industry.

		Industry Rank	Sector Rank
P/FCF	17.89
EV/EBITDA	14.47

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.
TME has an outstanding profitability rating, which may justify a higher PE ratio.
A more expensive valuation may be justified as TME's earnings are expected to grow with 16.49% in the coming years.

PEG (NY)0.88

PEG (5Y)1.82

EPS Next 2Y18.33%

EPS Next 3Y16.49%

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5. Dividend

5.1 Amount

TME has a Yearly Dividend Yield of 1.91%.
The stock price of TME dropped by -24.06% in the last 3 months. With lower prices the dividend yield is higher, but it may be a sign investors do not trust the long term dividend.
TME's Dividend Yield is rather good when compared to the industry average which is at 7.58. TME pays more dividend than 88.75% of the companies in the same industry.
TME's Dividend Yield is comparable with the S&P500 average which is at 1.82.

		Industry Rank	Sector Rank
Dividend Yield	1.91%

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 3Y16.49%

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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 19.8 and the Price/Book (PB) ratio is 2.72.

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 22.58% in the next year.