Head-To-Head Analysis: NetEase (NTES) vs. The Competition

NetEase (NASDAQ: NTES) is one of 186 public companies in the “IT Services & Consulting” industry, but how does it compare to its peers? We will compare NetEase to similar companies based on the strength of its earnings, profitability, valuation, institutional ownership, dividends, analyst recommendations and risk.

Profitability

This table compares NetEase and its peers’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
NetEase	25.34%	31.84%	21.48%
NetEase Competitors	-20.19%	-271.32%	-4.50%

Volatility & Risk

NetEase has a beta of 0.93, indicating that its stock price is 7% less volatile than the S&P 500. Comparatively, NetEase’s peers have a beta of 1.15, indicating that their average stock price is 15% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings for NetEase and its peers, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
NetEase	3	4	8	0	2.33
NetEase Competitors	726	4659	7416	169	2.54

NetEase currently has a consensus target price of $322.77, suggesting a potential downside of 0.51%. As a group, “IT Services & Consulting” companies have a potential upside of 2.21%. Given NetEase’s peers stronger consensus rating and higher possible upside, analysts clearly believe NetEase has less favorable growth aspects than its peers.

Earnings & Valuation

This table compares NetEase and its peers gross revenue, earnings per share and valuation.

	Gross Revenue	Net Income	Price/Earnings Ratio
NetEase	$5.50 billion	$1.67 billion	21.66
NetEase Competitors	$2.81 billion	$293.37 million	297.89

NetEase has higher revenue and earnings than its peers. NetEase is trading at a lower price-to-earnings ratio than its peers, indicating that it is currently more affordable than other companies in its industry.

Dividends

NetEase pays an annual dividend of $2.91 per share and has a dividend yield of 0.9%. NetEase pays out 19.4% of its earnings in the form of a dividend. As a group, “IT Services & Consulting” companies pay a dividend yield of 1.5% and pay out 36.5% of their earnings in the form of a dividend.

Insider and Institutional Ownership

50.5% of NetEase shares are held by institutional investors. Comparatively, 63.3% of shares of all “IT Services & Consulting” companies are held by institutional investors. 54.7% of NetEase shares are held by insiders. Comparatively, 16.4% of shares of all “IT Services & Consulting” companies are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Summary

NetEase peers beat NetEase on 8 of the 15 factors compared.

NetEase Company Profile

NetEase, Inc. (NetEase) is a technology company. The Company operates an interactive online community in China and is a provider of Chinese language content and services through its online games, Internet media, e-mail, e-commerce and other businesses. The Company operates through three segments: Online Game Services; Advertising Services, and E-mail, E-commerce and Others. Its online games business primarily focuses on offering personal computer (PC)-client massively multi-player online role-playing games (PC-client MMORPGs), as well as mobile games to the Chinese market. The NetEase Websites provide Internet users with Chinese language online services centered over three core service categories, which include content, community and communication. Its online advertising offerings include banner advertising, direct e-mail, sponsored special events, games, contests and other activities. It offers free and fee-based premium e-mail services to its individual users and corporate users.

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