Is Glu Mobile Stock Undervalued after the Recent Pullback?



Forward price-to-earnings ratio

Glu Mobile (GLUU) has a forward 2019 PE multiple of 24.5x, and this multiple stands at 17.2x for 2020. In comparison, Glu Mobile’s EPS are expected to rise 14.3% in 2019 and 47% in 2020.

Glu Mobile stock might look expensive, considering its earnings growth this year. However, its robust expected EPS growth for 2020 holds it in good stead and should keep investors interested.

Glu Mobile has a market cap–to–sales ratio of 2.8x, which is again reasonable, given its revenue and earnings growth.

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Robust top- and bottom-line growth

Glu Mobile isn’t too expensive, given the company’s revenue and earnings growth.

Analysts expect Glu Mobile’s sales to rise at a compound annual growth rate of 18.2% over the next three years. Comparatively, the company’s EBITDA and operating profit are expected to rise 38.4% and 54%, respectively, over the next three years.

Glu Mobile has an operating leverage ratio of 4.4x, which indicates that every dollar rise in sales will increase operating profit by $4.4.

Gaming portfolio

Glu Mobile has three growth games in its portfolio: Design Home, Covet Fashion, and the TSB franchise. This year, it will be releasing WWE Universe in May, Diner Dash Adventures in July, and Disney Sorcerer’s Arena in August. If one of the new releases becomes a hit among gamers, revenue would rise substantially in the upcoming quarters.

Glu Mobile increased its full-year bookings guidance by $10 million, and it now estimates bookings between $445 million and $455 million. The 20% decline in Glu Mobile’s stock provides an interesting opportunity for investors.

Wall Street remains optimistic and has a 12-month target price of $11.51, which is 33% above its current price.


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