Valuation: EPS, PE, and Reverse DCF

Sea Ltd (SE) stock is a large conglomerate operating in key emerging markets like Southeast Asia and Latin America, primarily in e-commerce (Shopee), digital finance (Monee), and digital entertainment (Garena).

The company has successfully flipped to GAAP profitability, showing a stunning operational turnaround. In Q2 2025, GAAP Operating Income hit $488 million, up significantly from the prior year. Crucially, the Garena gaming platform, featuring the wildly popular game Free Fire, is the main earnings driver, contributing 44% of adjusted EBITDA. Following a return to growth in its core gaming segment, Sea Limited raised its full-year guidance, expecting digital entertainment bookings to grow over 30% in 2025.

The strong balance sheet, with $11.5 billion in net cash , provides a long runway for continued expansion and digital migration across its markets. We perform a reverse DCF valuation based on the current $1.95 TTM EPS to see what growth is currently "baked into" the stock price. Find out why you should "let your winners keep winning" and why we are holding this stock.

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Timestamps:

[0:00] - The Financial Turnaround: Revenue Growth & Operating Leverage

[1:34] - Sea Limited Conglomerate: E-commerce, Gaming, and Fintech Overview

[2:21] - The Massive Addressable Market and Hierarchy

[2:48] - Why the Stock is Up: GAAP Profitability and Market Expectations

[4:05] - Segment Analysis: Revenue Breakdown vs. Earnings Power

[4:30] - What is a Digital Entertainment Booking (Garena's Model)?[5:30] - The Global Scale of the Free Fire Game

[6:06] - Garena's Growth Resumes: Bookings and Active Users Rise

[7:05] - The EBITDA Story: Why Sea is Still a Gaming Company (44% of Earnings)

[8:06] - Group Profitability: Q2 2025 GAAP Operating Income

[8:45] - Adjustments to EBITDA (Deferred Revenue, Loan Book, SBC)[9:40] - The Strong Balance Sheet

[10:10] - Strategic Importance in Southeast Asia & Latin America

[11:09] - Valuation Check: P/E Ratio and TTM EPS

[11:58] - Reverse DCF Analysis: What Growth is Priced In?

[13:35] - Why We Don't Trim Winning Stocks

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Content in this video is for general information or entertainment only and is not specific or individual investment advice. Forecasts and information presented may not develop as predicted and there is no guarantee any strategies presented will be successful. All investing involves risk, and you could lose some or all of your principal.

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Nick and Kasey own shares of Sea Ltd