Author: admin

A company’s “normal” or “fair” PE ratio is shaped by growth expectations and risk. Fast-growing businesses or those with lower risk profiles generally command higher PE ratios, since investors are willing to pay a premium for anticipated earnings growth or reliable profits.

Currently, Sea trades at a PE ratio of 58.8x. This is elevated compared to the Multiline Retail industry average of 20.3x and a peer group average of 52.2x. While this appears high on the surface, it is important to look deeper. Simply Wall St’s proprietary “Fair Ratio” for Sea is calculated at 34.1x. The Fair Ratio incorporates more than just earnings; it also considers growth prospects, industry trends, profit margins, market cap, and company-specific risks. As a result, it provides a more nuanced benchmark for a company’s valuation than a simple comparison with peers or the broader industry.

Comparing Sea’s actual PE ratio (58.8x) to its Fair Ratio (34.1x) suggests the market is currently pricing in considerable future earnings growth or perhaps underestimating risks. The stock trades well above its Fair Ratio, indicating it is overvalued according to this metric.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1410 companies where insiders are betting big on explosive growth.

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is simply your story or perspective on a company, where you connect your views about its future, such as growth in e-commerce, fintech, or gaming, to concrete numbers such as future revenue, earnings, and fair value estimates. Narratives bridge the gap between a company’s story and a full financial forecast, enabling you to see how your expectations would translate into a fair value for the stock.

On Simply Wall St’s Community page, Narratives are an accessible tool used by millions of investors; they make it easy for you to craft, refine, and share your own investment thesis. Narratives help guide your decisions by showing in real time whether your fair value sits above or below the current price, giving you more information about when to act. Plus, Narratives are dynamic, so when key news or new earnings are released, they update automatically and your outlook can stay current.

For example, Sea’s Narratives range from bullish views forecasting nearly $33.2 billion in revenue and strong margin expansion over the next three years, to more cautious takes projecting risks from intensifying competition and regulatory changes. The most optimistic fair value estimate for Sea is $241.00 per share while the most conservative estimate is $165.00.

Do you think there’s more to the story for Sea? Head over to our Community to see what others are saying!

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.

Companies discussed in this article include SE.

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