Critical Analysis: Tencent (OTC:TCEHY) and SEA (NYSE:SE)

Tencent (OTC:TCEHY) and SEA (NYSE:SE) are both large-cap computer and technology companies, but which is the superior business? We will compare the two businesses based on the strength of their analyst recommendations, earnings, dividends, risk, institutional ownership, profitability and valuation.

Volatility and Risk

Tencent has a beta of 0.16, indicating that its stock price is 84% less volatile than the S&P 500. Comparatively, SEA has a beta of 1.55, indicating that its stock price is 55% more volatile than the S&P 500.

Institutional and Insider Ownership

0.0% of Tencent shares are owned by institutional investors. Comparatively, 59.5% of SEA shares are owned by institutional investors. 0.2% of SEA shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Tencent and SEA’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Tencent	26.41%	19.82%	11.10%
SEA	0.64%	1.40%	0.50%

Analyst Recommendations

This is a breakdown of current ratings and price targets for Tencent and SEA, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Tencent	0	0	0	0	0.00
SEA	1	2	10	1	2.79

SEA has a consensus target price of $91.21, indicating a potential downside of 29.13%. Given SEA’s stronger consensus rating and higher possible upside, analysts plainly believe SEA is more favorable than Tencent.

Valuation & Earnings

This table compares Tencent and SEA”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Tencent	$86.17 billion	7.11	$16.28 billion	$2.48	26.90
SEA	$13.06 billion	5.64	$150.73 million	$0.15	858.00

Tencent has higher revenue and earnings than SEA. Tencent is trading at a lower price-to-earnings ratio than SEA, indicating that it is currently the more affordable of the two stocks.

Summary

SEA beats Tencent on 8 of the 15 factors compared between the two stocks.

About Tencent

Tencent Holdings Limited, an investment holding company, offers value-added services (VAS), online advertising, fintech, and business services in the People’s Republic of China and internationally. It operates through VAS, Online Advertising, FinTech and Business Services, and Others segments. The company’s consumers business provides communication and services, such as instant messaging and social network; digital content including online games, videos, live streaming, news, music, and literature; fintech services, which includes mobile payment, wealth management, loans, and securities trading; and various tools, such as network security management, browser, navigation, application management, email, etc. Its enterprise business comprises marketing solutions, which offers digital tools including user insight, creative management, placement strategy, and digital assets management; and cloud services, such as cloud computing, big data analytics, artificial intelligence, Internet of Things, security and other technologies for financial services, education, healthcare, retail, industry, transport, energy, and radio & television application. In addition, the company operates innovation business, which includes artificial intelligences; and discover and develops enterprise and next-generation technologies for food production, energy, and water management application. Tencent Holdings Limited was formerly known as Tencent (BVI) Limited and changed its name to Tencent Holding Limited in February 2004. The company was founded in 1998 and is headquartered in Shenzhen, the People’s Republic of China.

About SEA

Sea Ltd. is an internet and mobile platform company, which engages in the provision of online gaming services. It operates through the following segments: Digital Entertainment, E-Commerce, and Digital Financial Services. The Digital Entertainment segment offers and develops mobile and PC online games. The E-Commerce segment manages a third-party marketplace through the Shopee mobile app and websites that connect buyers and sellers. The Digital Financial Services segment includes a variety of payment services and loans to individuals and businesses through SeaMoney. Sea was founded by Xiao Dong Li, Gang Ye, and Jing Ye Chen on May 8, 2009 and is headquartered in Singapore.