Investment Value of an Internet Company in China: A Case Study of Tencent Holdings Company

Abstract

Purpose - Traditional industries can usually be estimated and analyzed from multiple angles, such as the balance sheet. However, the proportion of other intangible assets in valuations is high and cannot be reflected in the balance sheet in Internet companies. Therefore, through various valuation methods to study and evaluate the investment value of the stock of Internet industry listed companies, finding heavily investing listed companies in the Internet industry has important practical significance. Design/Methodology/Approach - Starting from the theory of value investment, combined with financial analysis methods and valuation analysis methods, the study analyzes the company’s business, finances, and valuation to achieve the purpose of correcting the company’s stock investment. Findings - The value of Tencent, which we calculated through the PE valuation method and the branch valuation method, is close to the average stock price of Tencent in the past years, indicating that in the long run, the market is relatively rational. The value of the current stock price is lower than our valuation, explaining that the current market price is at a relatively underestimated level, and it has certain investment value. Research Implications - This study adopts the PE and the branch valuation methods, making the stock value research method more objective, more scientific, and rigorous to help investors maximize information effectiveness, and make rational judgments to find investment opportunities or investment risks earlier.