Jul 7, 2022
[4 min Read]
You are probably aware that Sea Limited (NYSE: SE) is a leader in the Electronic Gaming & Multimedia space. In this analysis, we are going to look at some of the key financial ratios for Sea Limited to determine a price prediction for SE. Remember these price predictions take into account several assumptions (which I will highlight) to determine a future price. I'll share my SE stock price prediction, then show you the approach and assumptions used to calculate the SE stock forecast.
Before we go any further, let me start by saying this, stock forecasting is hard. I don't know what the future will hold, and neither do Wall Street Analysts. If they could accurately predict the future, they would be able to beat the S&P 500 and I would be extremely wealthy. What I can say is that we can use available data to determine a reasonable SE stock forecast and helps us make better investment decisions, so hopefully, you find this analysis useful.
The Sea Limited stock price prediction of $50.45 was derived from 2 main valuation methods (which are averaged for the final price target you see above). I'll dive into the approach to show you how I determined how I “predicted” a stock price of $50.45 for SE.
The Financial growth Metrics provide an analytics valuation approach to determining a reasonable SE stock forecast. The comparable companies analysis determines an SE stock forecast by comparing SE's financial ratios to the average financial ratios of a group of similar stocks.
For this part of the analysis, I am looking at the history of key financial metrics for Sea Limited to forecast the stock into 2022 and 2025. Most investors know that historical performance does not guarantee future performance, but it is useful to see how SE has been trending.
SE has experienced a 3 Year Earnings Growth Per Share of 24.44%. Let's assume that SE can continue to grow Revenue and Earnings at a similar rate for the next three years, then we can assume the SE stock forecast for 2025 will follow a similar growth trajectory. I recognize there are a lot of other factors but this is a straightforward and solid approach.
With SE Earnings Per Share of -3.96 projected out at the 3 year growth rate gives us a future EPS of -1.71. SE's Forward Price to Earnings Ratio is 17.49 (and we assume this remains the same) then we determine the SE stock forecast by multiple the P/E by the EPS to give us a stock price prediction of -$29.91 per share (Which is better than their current PE * EPS price forecast of -$69.26).
There are other ways to predict the price for SE but I would argue that P/E, EPS, and Earnings Growth are the most commonly used financial metrics by analysts and investors. This is why I used them to forecast SE's stock price.
In order to undergo a comparable analysis, we need to outline SE's main competitors. These competitors need to have; a stock, valid financial ratios, operations similar to SE, and a market cap similar to SE (if possible).
By keeping this in mind, I found the following list of companies to be some of SE stocks closest competitors:
RBLX, ATVI, TTWO, and EA
Overall, SE stock is overvalued and needs to experience a change in stock price of (an average of) 77.43% to be considered “at fair value”. Applying this percentage change to SE's current price of $73.73, implies a forecasted price of $130.82.
Analyst Ratings have provided relatively strong indication of future price movement, which is why they are used to (hopefully) support our SE stock forecast. There are a total of 31 analyst ratings for SE, which are distributed as follows:
The general consensus among analysts is that the SE stock is a "buy" implying that their stock is currently undervalued (or potentially at fair value). This contradicts our price target achieved through our 2 valuation methods, however, it is in agreaance with the result achieved from our comparable analysis.
Should you buy SE? Well, based on the overall SE stock forecast of $50.45 per share, and the current price of SE being $73.73, I would go against the analysts and say SE is a sell. Let me know what you think, happy to dive into other aspects of SE to help you make an informed investment decision.