GameStop: A Stock With More Potential Than You Think

GameStop: A Stock With More Potential Than You Think

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2013 could be a great year for GameStop (GME) and its shareholders. Microsoft (MSFT) is planning to release its next generation console by year-end with Sony planning to release its new hardware before the holiday season as well. Grand Theft Auto V, a video game by Take-Two Interactive Software (TTWO), will be released in September. The GTA franchise has generated 125 million in sales to date and GTA V has the potential to be the biggest game launch of the year.

GameStop has been taking abuse lately because its industry is shrinking as consumers shift to mobile games. However, the video-game retailer is making strategic moves into tablet apps, free online games, and other digital revenue streams that are allowing them to capitalize on this shift.

[Related: Find Good Buys With Strong Returns and High Quality]

Fourth-quarter profits for GameStop beat estimates with net income rising to $261.1 from $174.7. EPS grew from $1.27 in Q4 2011 to $2.15 in Q4 2012 and EPS is estimated to be $3.17 in 2013 and $3.26 in 2014. Another highlight is the $1.10 dividend GameStop offers, a type of return to shareholders that is hard to find on the street these days.

With a quality ratio of .55 and price-to-book value of 1.54, GameStop meets the requirements for a bargain priced high quality stock, which means having a quality ratio (gross profit margin/total assets) greater than .33 and a price-to-book value less than 1.7.  Bargain price stocks that score high on quality have been show to outperform the overall market by 4% annually.

Business Solutions: Investing Ideas

Although GameStop may not look great from an industry viewpoint, over the next year the retailer should put up some strong numbers thanks to next generation hardware sales and game sales for these new consoles.

A consumer usually buys 3 to 5 games with the hardware, which will help boost GameStop’s lagging new game sales numbers. There is also the promise of the retailer adjusting to the new gaming landscape by starting to focus on new digital revenue streams.

GameStop is also at a bargain and ranks high on the quality ratio, a good sign that it has the potential to outperform the market over the next year. GameStop has a lot of potential good news coming down the pipe this year and is showing that it’s willing to adapt, so I recommend taking a closer look at this stock.


More investing ideas from Nick Sousa:

Platinum Metals: Boost From New Trading Block & Emission Standards

Disney’s Great Leadership & Content Mean a Big Winner 

Healthcare Sector: High Quality Stocks at a Great Value

Find Good Buys With Strong Returns and High Quality

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18 Responses to “GameStop: A Stock With More Potential Than You Think”

  1. Not sure why GME is at 30. This company was left by most investors. Refresh of consoles, continued resales for new console games, sales of mobile devices…all justify value for this company, it seems.

  2. Gamestop is a good stock in disguise.

  3. I never thought mobile games would take such a toll on businesses like GameStop.

  4. Unsure the reason why GME is in thirty. This company was still left by means of nearly all investors. Rekindle of games consoles, ongoing resales pertaining to new system games, revenue of mobile phones… all make a case for importance with this organization, this indicates.

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  6. Not sure exactly why GME is twenty five. This provider had been quit by using many people. Fix regarding consoles, continuous resales pertaining to new technique game titles, income regarding cellphones… almost all produce a scenario with regard to relevance with this business, this means that.

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  13. This service provider were being give up through the use of a lot of people. Correct with regards to gaming systems, constant resales pertaining to fresh strategy video game titles, income with regards to cell phones… just about all build a scenario with regards to relevance with this small business, which means.

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