Sea Ltd (SE, Financial) has experienced a remarkable surge in its stock price, with a gain of 3.34% over the past week and an impressive 51.26% increase over the past three months. The company's market capitalization now stands at $34.79 billion, with the current stock price at $61.16. This recent performance has caught the attention of investors, as the stock is currently deemed significantly undervalued with a GF Value of $89.55, compared to a past GF Value of $97.66. Previously categorized as a possible value trap, Sea Ltd's current valuation suggests that it may be a compelling opportunity for value investors.
Understanding Sea Ltd's Business Model
Sea Ltd operates in the retail-cyclical industry, primarily through its e-commerce platform, Shopee, which is the largest in Southeast Asia by gross merchandise value and transactions. The company began as a gaming business, Garena, and later expanded into e-commerce and financial services. Shopee's success is evident in its widespread adoption across several core markets, with Indonesia being a significant contributor to its GMV. Garena's gaming segment continues to perform well, with Free Fire being a top revenue generator. SeaMoney, the company's financial arm, complements its other services by offering credit lending. 
Profitability Analysis of Sea Ltd
Sea Ltd's Profitability Rank stands at 4/10, indicating moderate profitability within its industry. The company's Operating Margin of 2.62% is better than 44.54% of its industry peers. Additionally, Sea Ltd's ROE of 2.48%, ROA of 0.88%, and ROIC of 1.81% all surpass the performance of over 40% of competitors. However, the company has only achieved profitability in one of the past ten years, which is a point of concern for potential investors. 
Growth Trajectory of Sea Ltd
Sea Ltd's Growth Rank is an impressive 9/10, reflecting its robust expansion in revenue and profitability. The company's 3-Year Revenue Growth Rate per Share of 33.80% and 5-Year Revenue Growth Rate per Share of 58.80% are higher than the majority of its industry counterparts. Looking ahead, Sea Ltd's Total Revenue Growth Rate is estimated at 10.25% for the next 3 to 5 years, while the EPS without NRI Growth Rate is projected at a substantial 37.03%. These figures suggest that Sea Ltd is on a strong upward trajectory, outpacing many of its peers in terms of growth. 
Investor Confidence in Sea Ltd
Notable investors have shown confidence in Sea Ltd, with Baillie Gifford (Trades, Portfolio) holding 34,183,394 shares, representing a 6.01% share percentage. Chase Coleman (Trades, Portfolio) owns 14,320,168 shares, accounting for 2.52% of the company, and Frank Sands (Trades, Portfolio) holds 7,348,797 shares, or 1.29%. The substantial investments by these prominent holders indicate a strong belief in the company's potential and strategy.
Competitive Landscape
When compared to its competitors, Sea Ltd holds its own in the retail-cyclical industry. eBay Inc (EBAY, Financial) has a market cap of $26.23 billion, Coupang Inc (CPNG, Financial) is valued at $39.63 billion, and Chewy Inc (CHWY, Financial) stands at $7.03 billion. Sea Ltd's market cap of $34.79 billion positions it competitively within this group, reflecting its significant presence and influence in the market.
Conclusion: Sea Ltd's Promising Outlook
In summary, Sea Ltd's recent stock performance and current valuation suggest a potentially lucrative opportunity for investors. The company's profitability metrics, although moderate, show promise when compared to industry peers. Its exceptional growth rates and the confidence shown by major holders further bolster the case for investment. When juxtaposed with key competitors, Sea Ltd demonstrates a strong market position, making it an attractive stock for those looking to capitalize on the retail-cyclical sector's potential. As the company continues to innovate and expand, it remains a noteworthy option for value investors seeking growth and profitability.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
