The gaming industry is poised to witness significant growth this year on the backs of high-speed internet access and the adoption of improved technologies. Against this backdrop, let us explore some attractively valued entertainment stocks, Nexters Inc. (GDEV) and Gravity Co., Ltd. (GRVY) now.
During the pandemic, to cope with isolation and uncertainties, consumers were inclined toward entertainment like gaming. As per the World Economic Reform, people would continue in 2023 as a part of their lifestyle and enjoyment even amid soaring fears of a recession.
In addition, Morgan Stanley research analyst Seyon Park commented, “Video game development teams are seeing better productivity and have improved efficiency. At the same time, titles that were strategically pushed back are now looking more likely to launch in 2023.”
Artificial Intelligence (AI) and Virtual Reality (VR) have significantly enhanced gaming experiences. Coupled with such investments, increased access to high-speed internet could drive gaming adoption among consumers.
Circana executive director Mat Piscatella stated that U.S. consumers spent $4.63 billion on video game content last month. Hardware sales amounted to $566 million, up 10% compared to the same period in 2021. According to Piscatella, this is the second-highest video game hardware spend for a March in U.S. history.
Furthermore, the global gaming market is projected to grow to $545.98 billion by 2028, exhibiting a CAGR of 13.2%.
Against this backdrop, it could be wise to add fundamentally sound and undervalued entertainment gaming stocks GDEV and GRVY to your portfolio now.
Nexters Inc. (GDEV)
Headquartered in Limassol, Cyprus, GDEV operates as a game development company worldwide. It develops desktop, mobile, web, and social games.
In terms of trailing-12-month EV/EBITDA, GDEV is trading at 7.97x, 19.3% lower than the industry average of 9.88x. Its trailing-12-month EV/EBIT multiple of 8.20 is 51.6% lower than the 16.96 industry average.
GDEV’s trailing-12-month net income margin of 20.49% is 505.7% higher than the industry average of 3.38%. Also, its trailing-12-month EBIT margin of 25.54% is 213.8% higher than the industry average of 8.14%.
For the fiscal third quarter that ended September 30, 2022, GDEV’s revenues increased 8.4% year-over-year to $124.80 million. Its profit from operations for the quarter came in at $47.61 million compared to a loss from operations of $111.39 million in the prior-year quarter.
Its total comprehensive income and earnings per share for the quarter stood at $30.76 million and $0.16, compared to the total comprehensive loss and net loss per share of $103.84 million and $0.59, respectively.
Also, the company’s cash and cash equivalents for the fiscal third quarter that ended September 30, 2022, stood at $131.53 million compared to $105.45 million in the previous-year quarter.
The stock has gained 4.7% over the past year to close the last trading session at $6.68. Moreover, it has gained 72.2% over the past month.
The company’s POWR Ratings reflect a promising outlook. GDEV has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Value, Sentiment, and Quality. GDEV is ranked #4 out of 30 stocks in the Entertainment – Toys & Video Games industry.
Beyond what we have mentioned above, one can see the additional ratings for GDEV’s Growth, Momentum, and Stability here.
Gravity Co., Ltd. (GRVY)
GRVY distributes, develops, and publishes online games in South Korea, Taiwan, Thailand, and Japan. It categorizes products into three categories: mobile games and applications, online games, and other games, and game-related products and services. The company is based in Seoul, South Korea.
On April 14, GRVY announced that its game ‘Ragnarok Origin’ was successfully launched in Southeast Asia on April 6, 2023. In addition, the game ranked the top in free downloads and top-grossing in countries such as the Philippines, Malaysia, and Singapore. The launch should add to the company’s revenue stream.
In terms of trailing-12-month EV/Sales, GRVY is trading at 0.71x, 63.1% lower than the industry average of 1.91x. Its trailing-12-month EV/EBIT multiple of 3.58 is 78.9% lower than the 16.96 industry average.
GRVY’s trailing-12-month net income margin of 13.34% is 294% higher than the industry average of 3.38%. Also, its trailing-12-month EBIT margin of 19.76% is 142.8% higher than the industry average of 8.14%.
For the fiscal third quarter that ended September 30, 2022, GRVY’s revenues from online games increased 5.3% year-over-year to $13.46 million. Net profit attributable to GRVY came in at $11.23 million, and earnings per ADS stood at $1.62. The company’s total current assets stood at $264.08 million as of September 30, 2022, compared to $213.83 million as of December 31, 2021.
The stock has gained 8.1% over the past year to close the last trading session at $53.53. Moreover, it has gained 10.9% over the past three months.
The company’s strong fundamentals are reflected in its POWR Ratings. GRVY has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Growth and Value and a B for Sentiment and Quality. GRVY is ranked #3 in the same industry.
To see the additional ratings for GRVY’s Momentum and Stability, click here.
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GDEV shares were trading at $6.76 per share on Wednesday morning, up $0.08 (+1.20%). Year-to-date, GDEV has gained 17.77%, versus a 6.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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