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Author: newsreporter Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 217  
Subject: Analyst comments Date: 6/12/2010 9:33 AM
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3 Quality Value Growth Stock Ideas
http://bit.ly/aFhcK5aFhcK5


GameStop (GME)

* Quality: Yes
* Value: Yes
* Growth: Yes

Quality: Yes

GME (GME: 21.14 -2.89%) has been king of the gaming retailers for quite some time. The company has been able to deliver solid FCF through the years. From 2008 to 2010, GME was able to increase FCF from $325m to $480m, which is a 47% increase. Very impressive despite difficult times and declines in same store sales of 1.6%. The stock price has dropped quite considerably since the peak and the guidance of lower same stores is also what seems to be keeping the stock price at where it is.

Management has also been equally impressive.

...

Value: Yes

Revisiting the company shows that GME is in value territory. With all the hype and expectation mostly gone since 2007, the current price looks good indeed.

My assumptions were fairly conservative for all three valuation methods. Growth was set to 13% and a discount rate of 12% produced the numbers below. If I lowball the projected FCF figures for the next year, I still get a DCF of $40 which is a 45% margin of safety.

...

Growth: Yes

If the market is supposedly forward looking, it clearly looks to be wrong on GME. The company has proven that it can grow both the top and bottom line, and the used game market is consistently generating billions in revenue for the company.

FCF growth has slowed slightly, with the percentage change from 2007 – 2009 period being the lowest at 12.4%, but FCF has easily grown above 10% each year.
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