NetEase Inc (NTES, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at 102.43, NetEase Inc has witnessed a daily gain of 5.82%, marked against a three-month change of 8.92%. A thorough analysis, underlined by the GuruFocus Score Rating, suggests that NetEase Inc is well-positioned for substantial growth in the near future.
Understanding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
NetEase Inc's GF Score components are as follows:
- Financial strength rank: 8/10
- Profitability rank: 10/10
- Growth rank: 10/10
- GF Value rank: 5/10
- Momentum rank: 6/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With high ranks in financial strength, profitability, and growth, and moderate ranks in GF value and momentum, GuruFocus assigned NetEase Inc the GF Score of 95 out of 100, which signals the highest outperformance potential.
NetEase Inc Business Overview
NetEase Inc, with a market cap of $66.06 billion and sales of $14.10 billion, started as an internet portal service in 1997 and has grown to become a leading online services provider in China. Its key services include online/mobile games, cloud music, media, advertising, email, live streaming, online education, and e-commerce. The company develops and operates some of China's most popular PC client and mobile games, and it partners with global leading game developers, such as Blizzard Entertainment and Mojang (a Microsoft subsidiary). With an operating margin of 22.73%, NetEase Inc demonstrates efficient operations and profitability.
Financial Strength Analysis
According to the Financial Strength rating, NetEase Inc's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. With an Altman Z-Score of 7.45, NetEase Inc exhibits a strong defense against financial distress, highlighting its robust financial stability. With a favorable Debt-to-Revenue ratio of 0.16, NetEase Inc's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows NetEase Inc's impressive standing among its peers in generating profit. NetEase Inc Operating Margin has increased (4.34%) over the past five years, as shown by the following data: 2018: 19.50; 2019: 23.28; 2020: 19.74; 2021: 18.74; 2022: 20.34. Furthermore, NetEase Inc's Gross Margin has seen a consistent rise over the past five years, as evidenced by the data: 2018: 53.43; 2019: 53.27; 2020: 52.92; 2021: 53.62; 2022: 54.68. This trend underscores the company's growing proficiency in transforming revenue into profit. The Piotroski F-Score confirms NetEase Inc's solid financial situation based on Joseph Piotroski's nine-point scale, which measures a company's profitability, funding and operating efficiency. NetEase Inc's strong Predictability Rank of 3.5 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, NetEase Inc demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 17.3%, which outperforms better than 67.38% of 515 companies in the Interactive Media industry. Moreover, NetEase Inc has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 10.8, and the rate over the past five years is 11.9. This trend accentuates the company's continued capability to drive growth.
Conclusion
Given the company's strong financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights NetEase Inc's unparalleled position for potential outperformance. This analysis suggests that NetEase Inc is a promising investment opportunity for value investors seeking robust growth and financial stability. GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
