JOYY (YY): Is It Worth Your Investment? A Comprehensive Analysis of Its Market Value
JOYY Inc (NASDAQ:YY) has shown a commendable performance in the stock market with a daily gain of 3.17% and a three-month gain of 24.48%. The company's Earnings Per Share (EPS) stands at 3.27. But the question remains, is the stock fairly valued? This article presents a detailed valuation analysis of JOYY (NASDAQ:YY). We invite you to read on to gain valuable insights into the company's financial standing and market value.
Company Overview
JOYY Inc is a renowned player in the social media platform industry. The company specializes in creating and sharing entertainment content and activities. JOYY (NASDAQ:YY) provides a platform for users to interact with each other in real time through online live media, offering an immersive entertainment experience. Its products include Bigo Live, Likee, and Hago. The company operates through two segments, Bigo and All Other, and has a strong presence in China, developed countries, the Middle East, and Southeast Asia.
As of September 6, 2023, JOYY's stock price stands at $35.96, while its GF Value, an estimation of fair value, is $34.92. With a market cap of $2.20 billion and sales of $2.30 billion, the company appears to be fairly valued. The following analysis delves deeper into the company's value, integrating financial assessment with essential company details.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, based on three key factors: historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to GuruFocus Value calculation, JOYY (NASDAQ:YY) appears to be fairly valued. This suggests that the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength
Before investing in a company, it is crucial to assess its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. The cash-to-debt ratio and interest coverage are excellent indicators of a company's financial strength. JOYY has a cash-to-debt ratio of 6.95, which is better than 50.96% of 571 companies in the Interactive Media industry. The overall financial strength of JOYY is 7 out of 10, indicating a fair financial position.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. JOYY has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $2.30 billion and Earnings Per Share (EPS) of $3.27. Its operating margin is 1.4%, which ranks worse than 52.74% of 584 companies in the Interactive Media industry. Overall, the profitability of JOYY is ranked 8 out of 10, indicating strong profitability.
Growth is a critical factor in the valuation of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of JOYY is 36%, which ranks better than 83.27% of 514 companies in the Interactive Media industry. The 3-year average EBITDA growth rate is 99.2%, which ranks better than 96.37% of 386 companies in the Interactive Media industry.
ROIC vs WACC
Another way to assess a company's profitability is to compare its return on invested capital (ROIC) and the weighted cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. For the past 12 months, JOYY's ROIC is 0.59, and its WACC is 4.29.
Conclusion
In conclusion, JOYY (NASDAQ:YY) appears to be fairly valued. The company's financial condition is fair, its profitability is strong, and its growth ranks better than 96.37% of 386 companies in the Interactive Media industry. To learn more about JOYY stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
