NetEase.com (NTES) is a Zacks #1 Rank (Strong Buy) thanks to rising estimates and its latest earnings surprise.
Shares can still be had at a good value and given the growth outlook there is plenty of upside.
Company Description
NetEase.com is an internet tech company making applications, online gaming, and providing services in China. The most notable product would be the popular World of Warcraft franchise.
Beat the Street
On Aug 17 NetEase.com reported $275 million in revenue, which was about $25 million higher than the consensus estimate. Online revenue rose 14% and continues to be the bulk of the business.
Earnings per share came in at $0.91, topping the Zacks Consensus Estimate by 13 cents. This was the fourth consecutive surprise for NetEase.com. Net profits were up more than 50% on a year over year basis.
Estimates Continue to Climb
Full-year estimates are up once again on the earnings surprise. This year’s Zacks Consensus Estimate rose 18 cents to $3.54, for an expected growth rate of 36%.
Next year’s average forecast is up 19 cents, to $3.97. That projects a 12% growth rate. The long-term earnings growth rate is just above 15% right now.
Solid Value
Thanks to those rising estimates and growth rates, NTES is trading at 13 times forward estimates and with a 0.9 PEG ratio. Both showing a nice discount.
The Chart
There has been a significant amount of noise in the share price, but you can see below that the estimates have been consistently rising. Any company based in China is enough to raise an eyebrow, but if the earnings hold up there is plenty of upside here.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service
Zacks Investment Research
