Tencent Music Entertainment Group (TME)
Valuation Overview•Is Tencent Music Entertainment Group Overvalued or Undervalued?
Trading at a discount across both intrinsic cash flow and relative peer multiples, indicating a strong margin of safety.
High-quality fundamentals with a strong composite quality score of 87/100, backed by robust profitability and solvency.
Analysts remain bullish, forecasting further upside expansion with consensus targets suggesting solid gains.
Verdict: High-quality compounder, with profitability as the only relative weakness.
Wall Street is highly bullish, projecting significant upside. This is paired with healthy capital returns, anchored by a strong, well-covered dividend yield.
TME demonstrates strong business quality with robust profitability and healthy margins. This is backed by a fortress balance sheet, holding significant net cash ($4.7B) and minimal debt risk.
The company demonstrates solid revenue growth (5.1% 3Y CAGR) paired with highly explosive earnings growth (44.8% EPS 3Y CAGR). This growth is supported by elite operational efficiency, sustaining an impressive 41.1% operating margin.
| Financial Metric | Trend (12Q) | Latest Qtr | 1Y Growth | 3Y CAGR | 5Y CAGR | 10Y CAGR |
|---|---|---|---|---|---|---|
| Revenue | $7.7B | +15.8% | +5.1% | +2.4% | — | |
| EBITDA | $2.3B | — | +25.6% | — | — | |
| Net Income | $1.9B | +66.4% | +44.3% | — | — | |
| EPS (Diluted) | $1.20 | +63.2% | +44.8% | +22.8% | — | |
| Free Cash Flow | $0.00 | +6.7% | +15.3% | +17.6% | — |
| Metric | TTM | 3Y Avg | 5Y Avg | 10Y Avg |
|---|---|---|---|---|
| Gross Margin | 57.0% | 40.6% | 36.6% | 35.0% |
| Operating Margin | 41.1% | 27.4% | 22.0% | 17.2% |
| Net Margin | 33.6% | 24.9% | 19.5% | 15.1% |
| FCF Margin | 24.5% | 28.3% | 23.1% | 22.4% |
| Quarter | EPS Est. | EPS Act. | Surprise | EPS | Rev |
|---|---|---|---|---|---|
| Q2'26Latest | $0.21 | $0.21 | +0.0% | ||
| Q1'26 | $0.23 | $0.17 | -24.2% | ||
| Q4'25 | $0.21 | $0.22 | +4.8% | ||
| Q3'25 | $0.20 | $0.23 | +15.0% | ||
| Q2'25 | $0.19 | $0.19 | +0.0% | ||
| Q1'25 | $0.19 | $0.20 | +5.3% | ||
| Q4'24 | $0.17 | $0.16 | -5.9% | ||
| Q3'24 | $0.15 | $0.15 | -2.6% |
Total return is -50.5% (1Y), lagging the benchmark by -75.5%
| Period | Total Return | vs S&P 500 (Alpha) | Dividend Contribution |
|---|---|---|---|
| YTD | -48.4% | -57.7% | — |
| 1Y | -50.5% | -75.5% | +2.6% |
| 3YCAGR | +8.1% | -11.6% | +10.6% |
| 5YCAGR | -8.8% | -21.5% | +5.3% |
| 10YCAGR | -3.8% | -17.5% | — |
The S&P 500 is at 31.3x trailing P/E — Expensive relative to historical averages.
Quick answers to common questions about Tencent Music Entertainment Group (TME) valuation, health, and returns.
Tencent Music Entertainment Group is estimated to be undervalued under our discounted cash flow framework. relative multiples indicate the stock is Cheap versus peers compared to industry peers. undervalued (implying +96.4% upside to DCF intrinsic value of $17.15)
Tencent Music Entertainment Group has multiple valuation anchors: DCF Intrinsic Value: $17.15 | Peer Relative Fair Value: $216.08 | Wall Street Analyst Target: $17.82 (implying +104.1% upside). A convergence of these signals offers higher conviction.
Tencent Music Entertainment Group displays excellent financial health with a composite quality score of 87/100, supported by a Altman Z-Score of 1.6 (distress zone), Piotroski F-Score of 8/9, Return on Invested Capital (ROIC) of 10.4%.
Tencent Music Entertainment Group pays a 2.1% dividend yield, covered by a 17% payout ratio with 2 years of growth, supplemented by a 0.7% buyback yield.
Tencent Music Entertainment Group's current growth trajectory is Accelerating. The company achieved +15.8% 1Y revenue growth and +63.2% 1Y EPS growth, compared to its 3Y revenue CAGR of +5.1%.
Wall Street consensus is Hold based on 24 analysts, beating EPS expectations in 25% of recent quarters with a -2-quarter streak. The consensus price target represents a +104.1% change from current levels.
Investment risks for Tencent Music Entertainment Group include: -67.9% 1-year max drawdown, elevated distress risk. Volatility risk is characterized by a beta of 1.17x.
No. These computations are purely quantitative model outputs for informational purposes. They do not account for qualitative management shifts or macro events. Always consult a licensed RIA before buying or selling shares.
Disclaimer: This page is for informational purposes only and does not constitute financial advice. All valuation models, scores, and target estimates are automated computations under stated assumptions and should not be relied upon as the sole basis for any investment decision.