Stock Analysis

Sea (NYSE:SE) is Up 36% over the last Quarter, These Fundamentals Give Investors Hope for the Future

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NYSE:SE
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Sea Limited's (NYSE:SE) share price is up a whopping 2,421% in the last three years, a handsome return for long term holders. It's also good to see the share price up 36% over the last quarter. As with any company, we want to know if the fundamentals support this increase, and we will look at both historical performance and future estimates.

The company reported its financial results recently, you can catch up on the latest numbers by reading our company report.

The stock has added US$11b to its market cap in the past week alone, this has increased its opportunities to raise cheaper capital from equity financing. When investors are hopeful for a company, this reduces the company's cost of equity and thus Sea can raise more capital to finance future growth.

In fact, just in the last 12 months, Sea rose some US$3.1b from financing, but equity investors aren't too affected because it is successfully outgrowing dilution over the years.

Most of the business expenses are related to marketing expenses, and Sea has spent about US$2.7b in the last year. This is expected from a growth company, as it increases their reach and presents their product in front of more potential customers.

Check out our latest analysis for Sea

Sea is currently a money losing company and this usually attracts a subset of risk taking investors, which gives current investors an opening to get in before larger institutions increase their position. With unprofitable companies, the market is more focused on the revenue growth potential and the value of the company's business model.

Over the last three years, Sea has grown its revenue at 74% annually. That's well above most pre-profit companies. And it's not just the revenue that is taking off. The share price is up 193% per year in that time.

It's always tempting to take profits after a share price gain like that, but high-growth companies like Sea can sometimes sustain strong growth for many years. So we'd recommend you take a closer look at this one, or even put it on your watchlist.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
NYSE:SE Earnings and Revenue Growth September 2nd 2021

Sea is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

It is apparent that analysts are optimistic on the company's growth in the future, and even estimate a break into profitability in the not so distant 2024. Usually, expected revenue growth rates of 27% are a very optimistic indicator and show that the company is on the right track for investors. 

The company also posted some positive cash inflows from operating activities, which indicates that they are well on their way to become profitable, barring any strong changes in demand.

Key Takeaways

We're pleased to report that Sea rewarded shareholders with a total shareholder return of 116% over the last year. The TSR has been even better over three years, coming in at 193% per year.

It seems that this growth is backed both by fundamental performance and market expectations. Sea grew revenues by 129% in the last 12 months, and analysts are estimating an annual revenue growth rate of 27%.

The company is spending a large portion in marketing and has a track record of successfully raising cash from equity investors. This shows that Sea is aggressively engaged in growth investing and can successfully stay afloat while operating in deficit.

While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Sea is showing 2 warning signs in our investment analysis, you should know about...

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

What are the risks and opportunities for Sea?

Sea Limited, together with its subsidiaries, engages in the digital entertainment, e-commerce, and digital financial service businesses in Southeast Asia, Latin America, rest of Asia, and internationally.

View Full Analysis

Rewards

  • Earnings are forecast to grow 68.55% per year

Risks

  • Volatile share price over the past 3 months

View all Risks and Rewards

Share Price

Market Cap

1Y Return

View Company Report

Simply Wall St analyst Goran Damchevski and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Goran Damchevski

Goran Damchevski

Goran is an Equity Analyst and Writer at Simply Wall St over 4 years of experience in financial analysis and company research. Personally, Goran has over 4 years of experience in financial analysis and company research, where he previously worked in a seed-stage startup as a capital markets research analyst and product lead and developed a financial data platform for equity investors. 

About NYSE:SE

Sea

Sea Limited, together with its subsidiaries, engages in the digital entertainment, e-commerce, and digital financial service businesses in Southeast Asia, Latin America, rest of Asia, and internationally.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation1
Future Growth4
Past Performance0
Financial Health5
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Excellent balance sheet with reasonable growth potential.