Tencent Music Entertainment Group (NYSE:TME) shareholders are no doubt happy to see the share price up 30% in the last month, but it’s still struggling to regain some recent loss. The annual growth rate over the past 30 days was 87%.
Tencent Music Entertainment Group, at 25.2x, is a stock to potentially avoid as its stock price soars, considering that about half of U.S. companies have a price-to-earnings ratio below 18x. You might think so. ×PER. Nevertheless, we need to dig a little deeper to determine whether there’s a rational basis for the P/E increase.
The recent situation has been positive for Tencent Music Entertainment Group as its revenue has been increasing despite adverse market returns. The high P/E ratio is probably because investors believe the company will continue to weather broader market headwinds better than other companies. If you don’t hope so, you will end up paying a very high price for no particular reason.
Check out our latest analysis for Tencent Music Entertainment Group.
NYSE:TME Price/Earnings Ratio vs. Industry October 11, 2024 If you would like to see what analysts are predicting for the future, check out this free report on Tencent Music Entertainment Group. Is Tencent Music Entertainment Group growing enough? For a P/E ratio like Tencent Music Entertainment Group’s to be considered reasonable, there is an inherent assumption that a company must outperform the market.
Looking back, the company saw its revenue grow by an exceptional 22% last year. Pleasingly, the growth over the past 12 months has also resulted in EPS increasing by a total of 44% compared to three years ago. So it’s safe to say that the company’s recent revenue growth has been impressive.
Turning to the outlook, analysts monitoring the company estimate that it is expected to grow at 18% annually over the next three years. The company is in a position to expect better returns, as the market expects returns of only 10% per year.
This information helps explain why Tencent Music Entertainment Group is trading at a very high P/E ratio compared to the market. Most investors expect this strong future growth and seem willing to pay more for the stock.
Important points While Tencent Music Entertainment Group’s stock price is being pushed in the right direction, its P/E ratio is also rising. While it’s not wise to use the price-to-earnings ratio alone to decide whether to sell a stock, it can be a practical guide to a company’s future prospects.
As we expected, our examination of analyst forecasts for Tencent Music Entertainment Group reveals that its strong earnings outlook is contributing to its high P/E ratio. At the moment, shareholders are satisfied with the P/E ratio as they are confident that future earnings are not threatened. Unless this situation changes, stock prices will continue to be strongly supported.
There are many other important risk factors on a company’s balance sheet. Tencent Music Entertainment Group’s free balance sheet analysis with 6 easy checks can uncover potentially troubling risks.
It’s important to make sure you look for great companies, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E ratio).
Evaluation is complex, but we will simplify it here.
A detailed analysis featuring fair value estimates, potential risks, dividends, insider transactions, and financial condition reveals whether Tencent Music Entertainment Group is undervalued or overvalued.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
