We look at Gamestop Corporation (NYSE:GME) a company in the Electronics Store industry currently at the attention of investors, to assess if it provides value for investors considering buying or selling it. Currently Gamestop Corporation is trading at $44.41 after moving up 0.98% in trading on Friday.
GME is trading with a trailing 12 month P/E multiple of 12.20 and an estimated forward P/E multiple of 10.03. The stock has an estimated 5 year annual growth of 12.23% and a PEG multiple of 1.00.
Rather than the usual Price to Earnings (P/E) multiple method, we use a slightly different method to assess if Gamestop Corporation is potentially a value buy for investors, the PEG ratio (P/E to growth). This PEG multiple takes into account the expected long term growth in earnings of the company rather than merely the growth for one earnings period ahead as forward P/E does.
That is to say, P/E simply doesn’t account for the long term prospects of GME. As a rule of thumb, a stock with a PEG of between 0 and 1 is usually considered to be underpriced, between 1 and 2 to be at fair value and over 2 to be overpriced. Based on the PEG ratio of GME being 1.00, we consider Gamestop Corporation to likely be underpriced.
This analysis means that value buyers who do not currently hold Gamestop Corporation (NYSE:GME) should consider buying and investors currently holding the stock should continue holding.
The mean analyst 12 month target price for Gamestop Corporation (NYSE:GME) is currently $50.20 or 13.03% above the current price. Additionally, the stock has been as high as $47.42 and as low as $30.88 in the last 52 weeks. Analysts are estimating that GME will report earnings per share of $0.60 next quarter.
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