Comparing Tencent (OTCMKTS:TCEHY) and Yelp (NYSE:YELP)

Yelp (NYSE:YELP) and Tencent (OTCMKTS:TCEHY) are both communication services companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, analyst recommendations, valuation, dividends, risk, profitability and earnings.

Volatility and Risk

Yelp has a beta of 0.43, indicating that its share price is 57% less volatile than the S&P 500. Comparatively, Tencent has a beta of 0.26, indicating that its share price is 74% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Yelp	8.59%	19.52%	13.44%
Tencent	29.83%	19.83%	11.76%

Insider and Institutional Ownership

90.1% of Yelp shares are held by institutional investors. Comparatively, 0.0% of Tencent shares are held by institutional investors. 8.3% of Yelp shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Yelp and Tencent”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Yelp	$1.47 billion	0.67	$145.60 million	$2.09	8.65
Tencent	$104.58 billion	4.84	$31.28 billion	$3.65	15.25

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

Analyst Ratings

This is a summary of current ratings and price targets for Yelp and Tencent, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Yelp	3	3	1	0	1.71
Tencent	0	2	2	0	2.50

Yelp presently has a consensus price target of $26.57, indicating a potential upside of 46.90%. Tencent has a consensus price target of $106.00, indicating a potential upside of 90.48%. Given Tencent’s stronger consensus rating and higher probable upside, analysts clearly believe Tencent is more favorable than Yelp.

Summary

Tencent beats Yelp on 10 of the 14 factors compared between the two stocks.

About Yelp

Yelp Inc. operates a platform that connects consumers with local businesses in the United States and internationally. The company's platform covers various categories, including restaurants, shopping, beauty and fitness, health, and other categories, as well as home, local, auto, professional, pets, events, real estate, and financial services. It provides free and paid advertising products to businesses, which include cost-per-click advertising and multi-location Ad products, as well as enables businesses to deliver targeted advertising to large and high-intent audience; and business listing page products. The company also offers other services comprising Yelp Guest Manager, a subscription-based suite of front-of-house management tools for restaurants, nightlife and certain other venues, which include online reservations, a waitlist management solution that allows consumers to check wait times and join waitlists remotely, as well as through hostless kiosks, and seating and server rotation management tools; Yelp Knowledge program that offers business owners local analytics and insights through access to its historical data and other proprietary content; and Yelp Fusion, which offers free access to various basic information through publicly available APIs, and paid access to content and data for consumer-facing enterprise use. In addition, it provides content licensing, as well as allows third-party data providers to update and manage business listing information on behalf of businesses. Further, the company offers its products directly through its sales force; indirectly through partners; and online through its website and business app, as well as non-advertising partner arrangements. It has partnership with Grubhub for providing consumers with a service to place food orders for pickup and delivery. The company was incorporated in 2004 and is based in San Francisco, California.

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.