Tencent (OTCMKTS:TCEHY) versus Internet Initiative Japan (OTCMKTS:IIJIY) Critical Survey

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

Risk & Volatility

Tencent has a beta of 0.29, indicating that its share price is 71% less volatile than the S&P 500. Comparatively, Internet Initiative Japan has a beta of 1.16, indicating that its share price is 16% more volatile than the S&P 500.

Institutional & Insider Ownership

0.0% of Tencent shares are owned by institutional investors. 6.7% of Internet Initiative Japan shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Tencent and Internet Initiative Japan’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Tencent	30.60%	19.52%	11.80%
Internet Initiative Japan	6.97%	15.88%	7.27%

Valuation and Earnings

This table compares Tencent and Internet Initiative Japan”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Tencent	$104.58 billion	4.82	$31.28 billion	$3.58	15.45
Internet Initiative Japan	$2.29 billion	1.60	$160.68 million	$1.80	22.22

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

Dividends

Tencent pays an annual dividend of $0.60 per share and has a dividend yield of 1.1%. Internet Initiative Japan pays an annual dividend of $0.18 per share and has a dividend yield of 0.5%. Tencent pays out 16.8% of its earnings in the form of a dividend. Internet Initiative Japan pays out 10.0% 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.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Tencent and Internet Initiative Japan, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Tencent	0	2	2	0	2.50
Internet Initiative Japan	0	0	0	1	4.00

Tencent presently has a consensus price target of $106.00, suggesting a potential upside of 91.68%. Given Tencent’s higher probable upside, equities research analysts clearly believe Tencent is more favorable than Internet Initiative Japan.

Summary

Tencent beats Internet Initiative Japan on 11 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 Internet Initiative Japan

Internet Initiative Japan Inc. provides Internet connectivity, WAN, outsourcing, systems integration, and network-related equipment sales services in Japan. It operates through two segments, Network Services and Systems Integration Business, and ATM Operation Business. The company offers mobile communication and remote access/telework services; WAN/network services, including SDN, multi-cloud network, closed connection, internet VPN, SEIL, remote access, wireless LAN, and GIGA-school; leased line and broadband services; IIJ DNS platform, and domain name registration and maintenance services; IIJ access ID management, dial-up access, and IIJ IPv6 fiber access services; and security solutions for IIJ managed firewall, DDoS protection, and managed IPS/IDS services. It also provides cloud solutions, such as HaaS/IaaS, cloud storage, monitoring/operation, virtual desktop, Paas/Saas, solution for Microsoft and AWS, IoT/M2M, ID management and authentication, network, global, mobile, license, and specialized solutions, as well as IIJ cloud exchange and IIJ cloud integration solutions; integrated, network, mail, and web security, endpoint, security assessment/consulting, web and mail hosting, online storage, content delivery/CDN/CMS, and system integration; IoT services and solutions in the field of industrial, agriculture, energy, and IoT-oriented mobile communication; industry-specific solution; content delivery; and global/privacy products. In addition, the company offers IT outsourcing, IIJ consulting, cognitive factory, IIJ PC deployment support, IIJ PaaS solution, IIJ EMM utilization support, IIJ private cloud, network solutions, IIJ security audit, IIJ malware analysis, IIJ content management, cloud integration solution for Microsoft and AWS, Microsoft 365 transition support solution, data center service, and data center construction engineering solutions, as well as DX edge services. The company was incorporated in 1992 and is headquartered in Tokyo, Japan.