SE

We rate Sea Ltd (SE) as a Hold with a composite score of 55.8/100 at a current price of $106.19. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in quality (76th percentile) and value (61th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a Narrow Moat rating (58/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Sea Ltd holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 55.8/100 places it at rank #1174 in our full 7,333-stock universe. With a $60.7B market capitalization, Sea Ltd operates at meaningful scale within the Services sector, providing competitive advantages in distribution, procurement, and customer reach.

Revenue is growing at 29%, though momentum at the 46th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 43% (-16.7pp vs sector) narrow to operating margins of 4% (+0.4pp vs sector) and net margins of 2.7%, yielding a gross-to-net conversion rate of 6%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $106.19, Sea Ltd is trading near fair value based on current fundamentals. Our value factor score of 61/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 144.5x (a 509% premium to the sector median of 23.7x), EV/EBITDA of 18.4x (at a premium), P/B of 8.1x, P/S of 1.0x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Medium uncertainty rating to Sea Ltd. The stock presents a balanced risk profile: elevated market sensitivity (beta of 1.39) and elevated valuation multiple (P/E 144.5x) that leaves limited margin for error. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.39); elevated valuation multiple (P/E 144.5x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 59th percentile and quality factor at the 76th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 43% provide a buffer against cost pressures; large-cap scale ($60.7B) provides resilience. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Sea Ltd's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 21.4%, and the balance sheet is managed within acceptable parameters (D/E: 46%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; Sea Ltd falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, Sea Ltd receives a Hold rating with a composite score of 55.8/100 (rank #1174 of 7,333). Our quantitative framework assigns a Narrow Moat (58/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 59/100.

Our analysis supports a neutral stance on Sea Ltd. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.