NetEase (NTES) vs. Its Peers Critical Analysis

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

Risk & Volatility

NetEase has a beta of 0.91, suggesting that its share price is 9% less volatile than the S&P 500. Comparatively, NetEase’s rivals have a beta of 1.10, suggesting that their average share price is 10% more volatile than the S&P 500.

Dividends

NetEase pays an annual dividend of $3.69 per share and has a dividend yield of 1.1%. NetEase pays out 25.5% of its earnings in the form of a dividend. As a group, “IT Services & Consulting” companies pay a dividend yield of 1.6% and pay out 39.6% of their earnings in the form of a dividend.

Profitability

This table compares NetEase and its rivals’ 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	-20.53%	-272.62%	-4.76%

Earnings and Valuation

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

	Gross Revenue	NetIncome	Price/Earnings Ratio
NetEase	$5.50 billion	$1.67 billion	23.79
NetEase Competitors	$2.79 billion	$290.25 million	301.72

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

Institutional and Insider Ownership

50.7% of NetEase shares are owned by institutional investors. Comparatively, 61.1% of shares of all “IT Services & Consulting” companies are owned by institutional investors. 54.7% of NetEase shares are owned by insiders. Comparatively, 16.5% of shares of all “IT Services & Consulting” companies are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for NetEase and its rivals, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
NetEase	3	4	8	0	2.33
NetEase Competitors	721	4569	7334	166	2.54

NetEase presently has a consensus target price of $322.77, suggesting a potential downside of 6.23%. As a group, “IT Services & Consulting” companies have a potential upside of 2.42%. Given NetEase’s rivals stronger consensus rating and higher probable upside, analysts clearly believe NetEase has less favorable growth aspects than its rivals.

Summary

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

About NetEase

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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