JOYY (YY) Valuation Analysis: A Closer Look at Its Modest Overvaluation
JOYY Inc (NASDAQ:YY), a social media platform, has recently seen a 1.97% daily gain, and a 3-month gain of 24.94%. Despite these promising figures, the stock's Earnings Per Share (EPS) stands at 3.27, leading to questions about whether the stock is modestly overvalued. This article aims to provide an in-depth valuation analysis of JOYY (NASDAQ:YY) to answer this question and guide potential investors.
Understanding JOYY Inc (NASDAQ:YY)
JOYY Inc is a leading player in the social media domain, known for creating and sharing engaging entertainment content and activities. The company's offerings, which include Bigo Live, Likee, and Hago, enable users to interact in real-time through online live media, offering an immersive entertainment experience. Despite its current stock price of $39.36, the fair value (GF Value) stands at $32.13, suggesting a potential overvaluation.
Deciphering the GF Value
The GF Value is a proprietary measure that provides an estimate of a stock's intrinsic value. This value is calculated based on historical multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. If the stock price is significantly above the GF Value Line, it indicates overvaluation, and vice versa.
According to the GF Value, JOYY (NASDAQ:YY) appears to be modestly overvalued. This suggests that the long-term return of its stock is likely to be lower than its business growth.
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Assessing JOYY's Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. JOYY's cash-to-debt ratio of 6.95 ranks worse than 50.26% of 569 companies in the Interactive Media industry. This suggests that JOYY's financial strength is fair, with a GuruFocus rank of 7 out of 10.
Profitability and Growth of JOYY
Investing in profitable companies is generally less risky, especially those demonstrating consistent profitability. JOYY has been profitable 9 out of the past 10 years, with an operating margin of 1.4%. This ranks worse than 51.97% of 583 companies in the Interactive Media industry. However, JOYY's growth ranks better than 82.56% of 516 companies in the industry, indicating strong profitability.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) can determine a company's profitability. JOYY's ROIC stands at 0.59, while its WACC is 4.73, suggesting the company is creating value for shareholders.
Conclusion
In conclusion, JOYY (NASDAQ:YY) appears to be modestly overvalued. Despite its fair financial condition and strong profitability, its stock price exceeds its intrinsic value. To learn more about JOYY stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
