Critical Comparison: HUYA (NYSE:HUYA) versus NetEase (NASDAQ:NTES)

NetEase (NASDAQ:NTES) and HUYA (NYSE:HUYA) are both communication services companies, but which is the superior business? We will compare the two companies based on the strength of their earnings, profitability, analyst recommendations, institutional ownership, risk, valuation and dividends.

Analyst Ratings

This is a summary of current recommendations and price targets for NetEase and HUYA, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
NetEase	1	2	6	0	2.56
HUYA	1	1	1	0	2.00

NetEase presently has a consensus price target of $159.86, indicating a potential upside of 23.49%. HUYA has a consensus price target of $3.40, indicating a potential upside of 56.32%. Given HUYA’s higher possible upside, analysts plainly believe HUYA is more favorable than NetEase.

Insider and Institutional Ownership

11.1% of NetEase shares are held by institutional investors. Comparatively, 23.2% of HUYA shares are held by institutional investors. 54.7% of NetEase shares are held by insiders. Comparatively, 1.2% of HUYA shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares NetEase and HUYA”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
NetEase	$16.11 billion	5.15	$4.83 billion	$7.26	17.83
HUYA	$6.89 billion	0.07	-$16.10 million	($0.06)	-36.25

NetEase has higher revenue and earnings than HUYA. HUYA is trading at a lower price-to-earnings ratio than NetEase, indicating that it is currently the more affordable of the two stocks.

Dividends

NetEase pays an annual dividend of $1.91 per share and has a dividend yield of 1.5%. HUYA pays an annual dividend of $0.12 per share and has a dividend yield of 5.5%. NetEase pays out 26.3% of its earnings in the form of a dividend. HUYA pays out -200.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. HUYA is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk and Volatility

NetEase has a beta of 0.64, indicating that its stock price is 36% less volatile than the S&P 500. Comparatively, HUYA has a beta of 0.84, indicating that its stock price is 16% less volatile than the S&P 500.

Profitability

This table compares NetEase and HUYA’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
NetEase	27.86%	19.50%	14.45%
HUYA	-1.59%	0.20%	0.14%

Summary

NetEase beats HUYA on 11 of the 16 factors compared between the two stocks.

About NetEase

NetEase, Inc. engages in online games, music streaming, online intelligent learning services, and internet content services businesses in China and internationally . The company operates through Games and Related Value-Added Services, Youdao, Cloud Music, and Innovative Businesses and Others segments. It develops and operates PC and mobile games, as well as offers games licensed from other game developers. The company's products and services include Youdao Dictionary, an online knowledge tool; Youdao Translation, a tool specifically designed to support translation needs of business and leisure travelers; U-Dictionary, an online dictionary and translation app; Youdao Kids' Dictionary, a smart and fun tool; smart devices, such as Youdao Dictionary Pen, Youdao Smart Learning Pad, Youdao Listening Pod, Youdao Smart Light, Youdao Pocket Translator, and Youdao Super Dictionary; online courses; interactive learning apps; and education digitalization solutions, such as Youdao Smart Learning Terminal, a device that automates paper-based homework processing; Youdao Smart Cloud, a cloud-based platform that allows third-party app developers, smart device brands, and manufacturers to the company's OCR capabilities; and Youdao Sports, a sports-centric educational system. Its products and services also include NetEase Cloud Music, a music streaming platform; Yanxuan, an e-commerce platform, which sells private label products; www.163.com portal and related mobile app, Wangyi Xinwen, which deliver information such as news, sports events, technology, fashion trends, and online entertainment; NetEase Mail, an email service; NetEase CC Live streaming, a live streaming platform with a focus on game broadcasting; and NetEase Pay, a payment platform. The company was formerly known as NetEase.com, Inc. and changed its name to NetEase, Inc. in March 2012. NetEase, Inc. was founded in 1997 and is headquartered in Hangzhou, the People's Republic of China.

About HUYA

HUYA Inc., together with its subsidiaries, operates game live streaming platforms in the People's Republic of China. Its platforms enable broadcasters and viewers to interact during live streaming. The company's live streaming content also covers other entertainment content, such as talent shows, anime, outdoor activities, live chats, and other genres. In addition, it operates Nimo TV, a game live streaming platform in international markets. Further, the company provides online advertising, cnt, internet value added, and cultural and creative services. The company was founded in 2014 and is headquartered in Guangzhou, China. HUYA Inc. is a subsidiary of Tencent Holdings Limited.