Shares of Sea Limited (SE, Financial) experienced a significant decline recently, dropping to $106.34, marking an 11.42% decrease. This downturn was driven by market reactions to the newly announced tariffs from the United States targeting regions where Sea operates.
Despite the current stock movement, Sea Limited's (SE, Financial) fundamental business performance remains strong. In 2024, the company reported a remarkable 29% increase in revenue while nearly tripling its net income, showcasing robust growth across its major segments: e-commerce (Shopee), digital financial services (SeaMoney), and digital entertainment (Garena). Shopee and SeaMoney achieved revenue growth of 38% and 35%, respectively, while Garena posted a 19% increase in bookings.
Sea's financial health is noteworthy, with approximately $10 billion in cash reserves. This positions the company advantageously for future expansions, particularly in its Brazilian e-commerce unit and lending segment. The Brazilian market showed promising signs with a 40% surge in monthly active users, alongside achieving break-even adjusted EBITDA for two consecutive quarters. Additionally, the lending unit reported a 60% increase in loan principal with a commendable non-performing loan ratio of 1.2%.
From a valuation perspective, Sea Limited (SE, Financial) appears to be trading below its intrinsic value. The stock's Price-to-Earnings (PE) ratio stands at 145.67, which is near its 1-year low. Notably, Sea's GF Value, calculated to be $87.34, suggests that the stock is modestly overvalued. For more insights into its valuation, you can refer to the GF Value page.
The company's financial strength is further illustrated by a strong Altman Z-Score of 3.31 and a Piotroski F-Score of 7, indicating a healthy financial situation. However, it's worth noting that the Return on Invested Capital (ROIC) is currently less than the Weighted Average Cost of Capital (WACC), which might indicate capital inefficiency.
Looking forward, Sea Limited (SE, Financial) is well-positioned to continue its growth trajectory, supported by its strong cash position and solid growth in key markets despite the recent stock price setback.
