GameStop's Successful Growth Will Continue to Make Investors Money!

Jim Cramer has been recommending this stock for some time now. His big recommendation that came on November 20, 2007, the same day that GameStop reported earnings, was right on target. GameStop is a retail video game store selling games, game systems, computers and peripherals for those systems. Their stores include GameStop and EBgames. Currently GameStop operates more than 5,000 stores in 16 countries.

During GameStop's quarterly report on November 20, 2007 described nothing less than more growth. Total revenues are expected to grow 28 to 29-percent, compared to other like stores growth estimate at 15-percent. In addition to GameStop's growth rate, it was announced on December 5, 2007 that GameStop would replace Dow Jones & Co. (publisher of the Wall Street Journal on the Standard & Poor's 500 stock index (S&P 500).

Jim Cramer has discussed GameStop (GME) on his CNBC show Mad Money many times. He has been consistently giving GameStop his "triple-buy" blessing since early November. Jim Cramer stated mid-November that "GameStop is not economically sensitive and it is benefiting from video game players which are older and more addicted than ever."

My analysis of the company and its performance are nearly equal to Jim Cramer and other stock analysts. The current price is well below my calculated value including my Margin of Safety (Town, 2006). The bottom line of my analysis which I completed after hours on December 6, 2007 is below. To read more on my criteria is for purchasing a stock for my portfolio, read "A Mission Statement for a Solid Stock Trading Strategy."

• Current Price: $59.65
• ROIC: 15.72%
• Current P/E: 41.4
• Historical P/E: 33.5
• EPS Growth Rate: 42.8%
• Equity Growth Rate: 80.94%

Stock Value: $411.72

My analysis shows that the stock is way undervalued right now by the market, even with my "Margin of Safety" (Town, 2006) calculation that I use in determining the actual BUY price. I have determined that GameStop would be on sale at $205.

I do not think GameStop is a "holiday play". GameStop is a long-term play (6-18 months). All of the data used to analyze GameStop (GME) was taken from MSN Money and Yahoo! Finance. Again, I am not a professional securities licensed broker, I am an amateur trader just sharing my ideas. Please comment on the article if you have any inputs, ideas or opinions regarding my analysis of GameStop (GME).

Remember, before investing in the stock market there are several personal financial building blocks you must first accomplish. You can read "Before You Invest ANY Money, READ THIS!" It is also critical that you understand the company you are investing in...as Jim Cramer says everyday, "Do your homework," and I agree, do your own research above and beyond what you read from the analysts. Sleeping good at night while investing is possible! As Phil Town states in his book, Rule #1, "If you wouldn't want to own the company for 10 years, you shouldn't own it for 10 minutes."

Resources

Cramer, J. J. (2007). Mad Money television show. CNBC, November 14, 2006.

Town, P. B. (2006). Rule #1, The simple strategy for successful investing in only 15 minutes a week! New York. Crown Publishers.