Why Electronic Arts Stock is a Great Value Stock Right Now

Here is what you should know about EA stock ahead of earnings

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Electronic Arts Inc. (NASDAQ:EA) is a one of the biggest video game companies in the world. The company is responsible for popular franchises like The Sims, Battlefield, Star Wars, as well games under the EA Sports sector like FIFA and Madden NFL. Further, Electronic Arts is slated to report earnings after the close on Thursday, November 5, amid the stock’s current bearish form. EA is currently down nearly 20% since tapping its 52-week high of $147.36 on Aug. 6. Nonetheless, the stock is up 40% from its 52-week low of $85.69, and also up about 11% year-to-date.

Electronic Arts has a market cap of $34.61 billion and a book value of $26.95 per share. Its price-to-book ratio stands at 4.66. The company has a trailing price-earnings (P/E) ratio of 18.47 and a forward P/E ratio of 26.95. Electronic Arts' P/E ratio at the moment is 17.72.

When it comes to quarterly earnings reports, Electronic Arts has beat expectations on all four of its most recent earnings  reports. The fourth quarter of 2019 was Electronic Arts' best performing quarter over the past 12 months, despite only beating expectations by $0.01. The company reported an earnings per share (EPS) of $2.52. In the company's latest quarterly financial report, Electronic Arts beat their target by 80%. The company reported an EPS of $1.42, beating expectations by a margin of $0.63.  As for the upcoming earnings report this week, Electronic Arts is expected to drop its EPS down to $0.04. The company has a trailing 12-month EPS of $6.76.

Electronic Arts EA YTD chart in 2020

Electronic Arts has had inconsistent revenue growth for the past four years, with the company oscillating above and below the $5 billion mark. Only in the past year and a half has the company grown revenue significantly. Electronic Arts grew revenue by more than $500 million in its last fiscal year. Over the past 12 months, the company’s total revenue has accumulated to $5.79 billion.

With the current fiscal year as an exception, Electronic Arts' net income has been stagnant at around $1 billion for the past four years. But, in 2020, the company has increased their net income by nearly 200%. Electronic Arts produced a total net income of $3.04 billion in their fiscal year 2020.

Electronic Arts currently has $5.96 billion in cash and $1.23 billion in total debt. The company’s balance sheet holds $11.11 billion in total assets and $3.65 billion in total liabilities. Electronic Arts' total equity stands at $7.461 billion.

Electronic Arts appears to be a well-run company with impressive numbers to back that theory up. The company’s cash outweighs its total debt by more than $4.5 billion. The P/E ratios are very good, especially when compared to its primary competitor, Activision Blizzard (ATVI). Moreover, although the company’s recent growth can be attributed in part to widespread quarantine, there is plenty of reason to believe the company still has a lot to look forward to in the coming years.

With gaming becoming increasingly popular, Electronic Arts is in a great position to take advantage for years to come. The company fundamentals point to it maintaining its recent gains in revenue and net income as it barrels forward into the next era of cloud gaming. Overall, Electronic Arts is great value play and should see decent growth in the coming years for those who jump in at the discounted pricing. 

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