Would you be interested in an opportunity in a company trading at 2x EV/EBITDA, under 5x P/E with a sustainable 11%+ dividend yield, that increased revenues 7% in the most recent fiscal year, and net debt practically at zero?
Gamestop (GME) is such an opportunity but obviously not without risk. The majority of the company’s sales and profits comes from selling game consoles and software. The market is pricing in that the company will go the way of Blockbuster but if the company is still around then under practically any scenario there is upside.
The company is guided for $3-3.25 but I estimate $2.71 as a base case. Despite the future potential miss, the stock is just too cheap and in my opinion, will be taken out via a private equity deal. PE could easily leverage this up, make money and still make an offer around twice the current price. That pretty much sums it up. If you want to read more I published an article on Seeking Alpha, but really it all comes down to: a) Will it be around (then great opportunity), b) Will it be able to replace any future potential drop in margin (then great opportunity), c) Will it be taken private (then great opportunity), d) Any positive provides fuel to stock (then great opportunity), e) They will go out of business and PE won't be interested (then value trap and poor opportunity).
Let me know what you think as I bought yesterday at around $13.10.
Submitted April 05, 2018 at 03:34AM by Sophocles75 https://ift.tt/2q7Mxt5
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