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Is the Time Right to Buy Sony Group (SONY)?

Amidst market expectations falling short for the current business year, Sony Group (SONY) faces a challenging landscape. So, let’s look at some of its financial metrics to analyze if it is the right time to buy the stock...

Japan-based Sony Group Corporation’s (SONY) projection for the current business year fell short of market expectations as the company anticipates a 3.2% decline in operating income to YEN1.17 trillion ($8.39 billion), which is below the analysts' average estimate of YEN1.28 trillion ($9.28 billion). The company cited a slow recovery in profitability in the videogame unit as a contributing factor.

Looking ahead, SONY is poised to make a foray into cloud gaming, signaling its intent to expand beyond traditional consoles. The company recognizes the significance of cloud computing in capitalizing on the growing trends in mobile gaming.

Additionally, SONY is strategically expanding its market share in the thriving business of camera smartphones by acquiring additional land near its image sensor factory in Kumamoto prefecture, Japan. However, SONY’s optimism about the future seems to overlook the uncertainties and risks associated with the smartphone market.

SONY reported steady results for the fiscal fourth quarter and the full year that ended March 2023. Total sales and financial services revenue totaled YEN3.06 trillion ($21.82 billion) for the fiscal fourth quarter, up 29.5%, while net income attributable to SONY’s stockholders rose 16.4% to YEN103.53 per share.

For the full year, its total sales and financial services revenue increased 16.3% to YEN11.54 trillion ($82.76 billion). However, SONY’s comprehensive income declined 62.5% year-over-year to YEN237.04 billion ($1.70 billion).

Let's delve into the key metrics of SONY to assess its current challenges and determine why it might be prudent to wait for a better entry point.

Analyzing SONY’s Net Income, P/E Ratio, ROA, and Asset Turnover Ratio

Net income of was $66.33 billion on June 30, 2020, then increasing to $93.74 billion on September 30, 2022. Overall, there is an increase in net income over time; the growth rate was 40.3% from June 30, 2020, to September 30, 2022.

SONY’s P/E ratio has seen fluctuations over the past few years. From June 2020 to September 2020, it decreased from 17.7 to 12.1. Subsequently, its P/E increased to 14.3 by December 2020 before declining to 12.5 in March 2021. After reaching a low point, P/E started to climb again, and by June 2021, it had risen up to 12.9. The largest increase occurred from September 2020 to December 2021, when it peaked at 20.2. Since then, SONY’s P/E has decreased, falling to 17.4 in March 2022 and 17.5 in June 2022. The last recorded value of pe for SONY is 17.4, a slight increase compared to the prior quarter.

Since June 2020, SONY's ROA has gone through fluctuations. It saw a growth of 1.3% from 0.029 to 0.04 between June 2020 and September 2020 and then went up to 0.044 in December 2020, resulting in a further peak of 51.7%. This was followed by a slight dip to 0.046 in March 2021, after which it declined steadily to 0.033 in September 2021. ROA was at its lowest point since December 2020 by the end of March 2022, with a value of 0.03, before seeing a slight upturn in September 2022 to 0.031 and then finally returning to its initial value of 0.03 in December 2022. Overall, the ROA of SONY has seen a growth of 3.4% since June 2020.

In addition, SONY’s asset turnover ratio has experienced fluctuations over the last three years, with the most recent value on March 31, 2023, being 0.37. Compared to the first value from June 30, 2020, of 0.364, this indicates a growth rate of 2%. Asset turnover ratio ranges from a low of 0.334 on June 30, 2022, to a high of 0.37 on March 31, 2023.

SONY’s Share Price Increased Significantly

There appears to be a steady upward trend in SONY's share prices, with the price increasing from $79.70 on December 16, 2022 to $98.44 on June 9, 2023. This indicates a growth rate of approximately 23.8% over this period. Here is a chart of SONY's price over the past 180 days.

POWR Rating Reflects Mixed Prospects

SONY has an overall C rating, translating to a Neutral in our POWR Ratings system. It is ranked #5 out of the 14 stocks in the F-rated Entertainment - Media Producers industry. SONY has a C grade for Value, Stability, and Quality.

How does Sony Group Corporation (SONY) Stack Up Against its Peers?

Other stocks in the Entertainment - Media Producers sector that may be worth considering are Tencent Music Entertainment Group ADR (TME), Fuji Media Holdings, Inc. (FJTNY) and Playtika Holding Corp. (PLTK) which are rated a B (Buy).

What To Do Next?

Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:

3 Stocks to DOUBLE This Year >

SONY shares were trading at $98.94 per share on Monday morning, up $0.50 (+0.51%). Year-to-date, SONY has gained 30.02%, versus a 13.02% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.


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