What Is Tencent Music Entertainment Group's (NYSE:TME) Share Price Doing?

Today we're going to take a look at the well-established Tencent Music Entertainment Group (NYSE:TME). The company's stock received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$8.85 at one point, and dropping to the lows of US$5.56. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Tencent Music Entertainment Group's current trading price of US$5.92 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Tencent Music Entertainment Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Tencent Music Entertainment Group

What is Tencent Music Entertainment Group worth?

Great news for investors – Tencent Music Entertainment Group is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 17.27x is currently well-below the industry average of 32.05x, meaning that it is trading at a cheaper price relative to its peers. However, given that Tencent Music Entertainment Group’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Tencent Music Entertainment Group generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -4.2% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Tencent Music Entertainment Group. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although TME is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to TME, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on TME for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 1 warning sign for Tencent Music Entertainment Group you should know about.

If you are no longer interested in Tencent Music Entertainment Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St 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. Simply Wall St has no position in any stocks mentioned.