Alphabet (NASDAQ:GOOGL) & Tencent (OTCMKTS:TCEHY) Financial Survey

Tencent (OTCMKTS:TCEHY) and Alphabet (NASDAQ:GOOGL) are both large-cap computer and technology companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, valuation, profitability, institutional ownership, risk and earnings.

Dividends

Tencent pays an annual dividend of $0.50 per share and has a dividend yield of 0.7%. Alphabet pays an annual dividend of $0.84 per share and has a dividend yield of 0.2%. Tencent pays out 15.4% of its earnings in the form of a dividend. Alphabet pays out 8.3% 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. Alphabet has raised its dividend for 1 consecutive years.

Profitability

This table compares Tencent and Alphabet’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Tencent	29.87%	18.85%	11.24%
Alphabet	32.23%	35.00%	25.30%

Insider and Institutional Ownership

0.0% of Tencent shares are owned by institutional investors. Comparatively, 40.0% of Alphabet shares are owned by institutional investors. 11.6% of Alphabet shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares Tencent and Alphabet”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Tencent	$91.85 billion	7.59	$27.00 billion	$3.25	23.50
Alphabet	$385.48 billion	10.58	$100.12 billion	$10.14	33.33

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

Volatility & Risk

Tencent has a beta of 0.22, suggesting that its share price is 78% less volatile than the S&P 500. Comparatively, Alphabet has a beta of 1.08, suggesting that its share price is 8% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings for Tencent and Alphabet, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Tencent	0	0	3	1	3.25
Alphabet	0	5	42	4	2.98

Tencent presently has a consensus target price of $102.00, indicating a potential upside of 33.53%. Alphabet has a consensus target price of $334.60, indicating a potential downside of 1.01%. Given Tencent’s stronger consensus rating and higher probable upside, equities analysts clearly believe Tencent is more favorable than Alphabet.

Summary

Alphabet beats Tencent on 15 of the 18 factors compared between the two stocks.

About Tencent

Tencent Holdings Limited, an investment holding company, offers value-added services (VAS), online advertising, fintech, and business services in the People's Republic of China and internationally. It operates through VAS, Online Advertising, FinTech and Business Services, and Others segments. The company's consumers business provides communication and services, such as instant messaging and social network; digital content including online games, videos, live streaming, news, music, and literature; fintech services, which includes mobile payment, wealth management, loans, and securities trading; and various tools, such as network security management, browser, navigation, application management, email, etc. Its enterprise business comprises marketing solutions, which offers digital tools including user insight, creative management, placement strategy, and digital assets management; and cloud services, such as cloud computing, big data analytics, artificial intelligence, Internet of Things, security and other technologies for financial services, education, healthcare, retail, industry, transport, energy, and radio & television application. In addition, the company operates innovation business, which includes artificial intelligences; and discover and develops enterprise and next-generation technologies for food production, energy, and water management application. Tencent Holdings Limited was formerly known as Tencent (BVI) Limited and changed its name to Tencent Holding Limited in February 2004. The company was founded in 1998 and is headquartered in Shenzhen, the People's Republic of China.

About Alphabet

Alphabet Inc. offers various products and platforms in the United States, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America. It operates through Google Services, Google Cloud, and Other Bets segments. The Google Services segment provides products and services, including ads, Android, Chrome, devices, Gmail, Google Drive, Google Maps, Google Photos, Google Play, Search, and YouTube. It is also involved in the sale of apps and in-app purchases and digital content in the Google Play and YouTube; and devices, as well as in the provision of YouTube consumer subscription services. The Google Cloud segment offers infrastructure, cybersecurity, databases, analytics, AI, and other services; Google Workspace that include cloud-based communication and collaboration tools for enterprises, such as Gmail, Docs, Drive, Calendar, and Meet; and other services for enterprise customers. The Other Bets segment sells healthcare-related and internet services. The company was incorporated in 1998 and is headquartered in Mountain View, California.