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A Look at the Valuations for Gaming Stocks

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Sep. 6 2018, Updated 10:30 a.m. ET

Valuation ratios

So far in this series, we’ve looked at the drivers and trends impacting the global gaming industry, as well as the revenue and earnings growth of gaming stocks. In this final part of the series, we’ll look at the valuation ratios and other metrics of these companies.

Activision Blizzard’s (ATVI) PE (price-to-earnings) ratio is 34.4x, which is higher than Electronic Arts’ (EA) ratio of 31.3x. However, ATVI’s PE ratio is lower than Take-Two Interactive Software’s (TTWO) and Zynga’s (ZNGA) ratios of 54.8x and 245.0x, respectively.

Activision is trading at over 7.0x its revenues, compared to EA at 6.5x, TTWO at 5.4x, and Zynga at 3.7x.

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Profit margins

In the chart above, we can see that Activision and EA have higher operating margins of 34.1% and 33.0%, respectively, compared to TTWO’s operating margin of 24.1% and Zynga’s operating margin of 15.8%.

ROA and ROE

EA’s return on equity (or ROE) is the highest among our group at 29.3%, followed by TTWO, Activision, and Zynga at 26.4%, 18.2%, and 5.6%, respectively.

Comparatively, the return on assets (or ROA) for EA, ATVI, TTWO, and Zynga stood at 18.8%, 11.1%, 11.9%, and 4.6%, respectively.

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