Financial Comparison: Tencent (OTCMKTS:TCEHY) & Yirendai (NYSE:YRD)

Tencent (OTCMKTS:TCEHY) and Yirendai (NYSE:YRD) are both computer and technology companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, risk, analyst recommendations, institutional ownership, profitability, valuation and earnings.

Analyst Recommendations

This is a breakdown of current recommendations for Tencent and Yirendai, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Tencent	0	0	1	1	3.50
Yirendai	0	0	0	0	0.00

Tencent currently has a consensus target price of $88.00, indicating a potential upside of 37.50%. Given Tencent’s stronger consensus rating and higher possible upside, analysts plainly believe Tencent is more favorable than Yirendai.

Insider & Institutional Ownership

0.0% of Tencent shares are held by institutional investors. Comparatively, 2.0% of Yirendai shares are held by institutional investors. 42.2% of Yirendai shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares Tencent and Yirendai”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	6.40	$27.00 billion	$2.95	21.69
Yirendai	$795.41 million	0.64	$216.77 million	$2.14	2.77

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

Dividends

Tencent pays an annual dividend of $0.50 per share and has a dividend yield of 0.8%. Yirendai pays an annual dividend of $0.40 per share and has a dividend yield of 6.8%. Tencent pays out 16.9% of its earnings in the form of a dividend. Yirendai pays out 18.7% 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.

Volatility & Risk

Tencent has a beta of 0.11, indicating that its stock price is 89% less volatile than the S&P 500. Comparatively, Yirendai has a beta of 0.76, indicating that its stock price is 24% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Tencent	29.39%	19.82%	11.44%
Yirendai	22.48%	14.33%	10.65%

Summary

Tencent beats Yirendai on 13 of the 17 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 Yirendai

Yiren Digital Ltd. provides financial services through an AI-powered platform in China. Its platform provides a suite of financial and lifestyle services. The company offers financial services, which provides a portfolio of loan products to borrowers; insurance brokerage services; and consumption and lifestyle services, including non-financial products and services to meet various consumer needs. It supports clients at various growth stages, addressing financing needs arising from consumption and production activities, and augmenting the well-being and security of individuals, families, and businesses. The company was formerly known as Yirendai Ltd. and changed its name to Yiren Digital Ltd. in September 2019. Yiren Digital Ltd. was founded in 2012 and is based in Beijing, the People's Republic of China. Yiren Digital Ltd. operates as a subsidiary of CreditEase Holdings (Cayman) Limited.