While not a mind-blowing move, it is good to see that the Tencent Music Entertainment Group (NYSE:TME) share price has gained 24% in the last three months. But that is small recompense for the exasperating returns over three years. Tragically, the share price declined 60% in that time. So it is really good to see an improvement. Perhaps the company has turned over a new leaf.
Now let’s have a look at the company’s fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Tencent Music Entertainment Group
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).
During the unfortunate three years of share price decline, Tencent Music Entertainment Group actually saw its earnings per share (EPS) improve by 8.0% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.
Since the change in EPS doesn’t seem to correlate with the change in share price, it’s worth taking a look at other metrics.
With revenue flat over three years, it seems unlikely that the share price is reflecting the top line. There doesn’t seem to be any clear correlation between the fundamental business metrics and the share price. That could mean that the stock was previously overrated, or it could spell opportunity now.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Tencent Music Entertainment Group is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Tencent Music Entertainment Group will earn in the future (free analyst consensus estimates)
A Different Perspective
Tencent Music Entertainment Group’s TSR for the year was broadly in line with the market average, at 29%. To take a positive view, the gain is pleasing, and it sure beats annualized TSR loss of 7%, which was endured over half a decade. While ‘turnarounds seldom turn’ there are green shoots for Tencent Music Entertainment Group. Is Tencent Music Entertainment Group cheap compared to other companies? These 3 valuation measures might help you decide.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
