With EPS Growth And More, Tencent Music Entertainment Group (NYSE:TME) Is Interesting
It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
So if you're like me, you might be more interested in profitable, growing companies, like Tencent Music Entertainment Group (NYSE:TME). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
See our latest analysis for Tencent Music Entertainment Group
How Fast Is Tencent Music Entertainment Group Growing Its Earnings Per Share?
Over the last three years, Tencent Music Entertainment Group has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a firecracker arcing through the night sky, Tencent Music Entertainment Group's EPS shot from CN¥1.26 to CN¥2.36, over the last year. You don't see 87% year-on-year growth like that, very often.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Tencent Music Entertainment Group shareholders can take confidence from the fact that EBIT margins are up from 8.6% to 15%, and revenue is growing. That's great to see, on both counts.
In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.
While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Tencent Music Entertainment Group?
Are Tencent Music Entertainment Group Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$25b company like Tencent Music Entertainment Group. But we do take comfort from the fact that they are investors in the company. Notably, they have an enormous stake in the company, worth CN¥998m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.
Is Tencent Music Entertainment Group Worth Keeping An Eye On?
Tencent Music Entertainment Group's earnings have taken off like any random crypto-currency did, back in 2017. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering Tencent Music Entertainment Group for a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 1 warning sign for Tencent Music Entertainment Group you should be aware of.
You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
This article by Simply Wall St is general in nature. 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.
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