Intrinsic value of Gamestop Corporation - GME

Previous Close

$5.42

  Intrinsic Value

$81.17

stock screener

  Rating & Target

str. buy

+999%

Previous close

$5.42

 
Intrinsic value

$81.17

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of GME stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
  4.99
  4.99
  4.99
  4.99
Revenue, $m
  9,668
  10,134
  10,624
  11,140
  11,682
  12,252
  12,852
  13,482
  14,145
  14,841
  15,573
  16,342
  17,150
  17,998
  18,890
  19,827
  20,811
  21,844
  22,930
  24,070
  25,268
  26,526
  27,847
  29,234
  30,691
  32,222
  33,828
  35,516
  37,288
  39,149
Variable operating expenses, $m
  9,031
  9,457
  9,906
  10,378
  10,874
  11,396
  11,944
  12,521
  13,127
  13,765
  14,251
  14,954
  15,693
  16,470
  17,286
  18,143
  19,044
  19,989
  20,983
  22,026
  23,122
  24,273
  25,482
  26,752
  28,085
  29,485
  30,956
  32,500
  34,122
  35,825
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  9,031
  9,457
  9,906
  10,378
  10,874
  11,396
  11,944
  12,521
  13,127
  13,765
  14,251
  14,954
  15,693
  16,470
  17,286
  18,143
  19,044
  19,989
  20,983
  22,026
  23,122
  24,273
  25,482
  26,752
  28,085
  29,485
  30,956
  32,500
  34,122
  35,825
Operating income, $m
  637
  677
  718
  762
  808
  857
  908
  961
  1,017
  1,077
  1,322
  1,388
  1,456
  1,528
  1,604
  1,684
  1,767
  1,855
  1,947
  2,044
  2,146
  2,252
  2,365
  2,482
  2,606
  2,736
  2,872
  3,016
  3,166
  3,324
EBITDA, $m
  915
  959
  1,005
  1,054
  1,105
  1,159
  1,216
  1,276
  1,338
  1,404
  1,473
  1,546
  1,622
  1,703
  1,787
  1,876
  1,969
  2,067
  2,169
  2,277
  2,391
  2,510
  2,635
  2,766
  2,904
  3,048
  3,200
  3,360
  3,528
  3,704
Interest expense (income), $m
  23
  57
  67
  77
  87
  98
  110
  122
  135
  149
  163
  178
  194
  210
  227
  246
  265
  285
  306
  328
  351
  376
  402
  429
  457
  487
  518
  551
  585
  621
  660
Earnings before tax, $m
  580
  610
  642
  675
  710
  747
  785
  826
  869
  914
  1,145
  1,194
  1,246
  1,301
  1,358
  1,419
  1,482
  1,549
  1,619
  1,692
  1,770
  1,851
  1,936
  2,025
  2,119
  2,218
  2,322
  2,430
  2,545
  2,665
Tax expense, $m
  157
  165
  173
  182
  192
  202
  212
  223
  235
  247
  309
  322
  336
  351
  367
  383
  400
  418
  437
  457
  478
  500
  523
  547
  572
  599
  627
  656
  687
  719
Net income, $m
  423
  445
  468
  493
  518
  545
  573
  603
  634
  667
  835
  872
  910
  950
  992
  1,036
  1,082
  1,131
  1,182
  1,236
  1,292
  1,351
  1,413
  1,479
  1,547
  1,619
  1,695
  1,774
  1,858
  1,945

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  5,283
  5,538
  5,805
  6,087
  6,384
  6,695
  7,023
  7,367
  7,729
  8,110
  8,510
  8,930
  9,371
  9,835
  10,322
  10,834
  11,372
  11,937
  12,530
  13,153
  13,808
  14,495
  15,217
  15,975
  16,771
  17,607
  18,485
  19,408
  20,376
  21,393
Adjusted assets (=assets-cash), $m
  5,283
  5,538
  5,805
  6,087
  6,384
  6,695
  7,023
  7,367
  7,729
  8,110
  8,510
  8,930
  9,371
  9,835
  10,322
  10,834
  11,372
  11,937
  12,530
  13,153
  13,808
  14,495
  15,217
  15,975
  16,771
  17,607
  18,485
  19,408
  20,376
  21,393
Revenue / Adjusted assets
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
Average production assets, $m
  1,537
  1,611
  1,689
  1,771
  1,857
  1,948
  2,043
  2,144
  2,249
  2,360
  2,476
  2,598
  2,727
  2,862
  3,004
  3,152
  3,309
  3,473
  3,646
  3,827
  4,018
  4,218
  4,428
  4,648
  4,880
  5,123
  5,379
  5,647
  5,929
  6,225
Working capital, $m
  -251
  -263
  -276
  -290
  -304
  -319
  -334
  -351
  -368
  -386
  -405
  -425
  -446
  -468
  -491
  -515
  -541
  -568
  -596
  -626
  -657
  -690
  -724
  -760
  -798
  -838
  -880
  -923
  -969
  -1,018
Total debt, $m
  955
  1,097
  1,248
  1,406
  1,572
  1,747
  1,931
  2,124
  2,327
  2,540
  2,765
  3,000
  3,248
  3,508
  3,782
  4,069
  4,370
  4,687
  5,020
  5,370
  5,737
  6,122
  6,527
  6,953
  7,399
  7,869
  8,361
  8,878
  9,422
  9,992
Total liabilities, $m
  2,964
  3,107
  3,257
  3,415
  3,581
  3,756
  3,940
  4,133
  4,336
  4,550
  4,774
  5,010
  5,257
  5,518
  5,791
  6,078
  6,380
  6,697
  7,029
  7,379
  7,746
  8,132
  8,537
  8,962
  9,409
  9,878
  10,370
  10,888
  11,431
  12,001
Total equity, $m
  2,319
  2,431
  2,549
  2,672
  2,802
  2,939
  3,083
  3,234
  3,393
  3,560
  3,736
  3,920
  4,114
  4,318
  4,532
  4,756
  4,992
  5,240
  5,501
  5,774
  6,062
  6,363
  6,680
  7,013
  7,363
  7,730
  8,115
  8,520
  8,945
  9,391
Total liabilities and equity, $m
  5,283
  5,538
  5,806
  6,087
  6,383
  6,695
  7,023
  7,367
  7,729
  8,110
  8,510
  8,930
  9,371
  9,836
  10,323
  10,834
  11,372
  11,937
  12,530
  13,153
  13,808
  14,495
  15,217
  15,975
  16,772
  17,608
  18,485
  19,408
  20,376
  21,392
Debt-to-equity ratio
  0.410
  0.450
  0.490
  0.530
  0.560
  0.590
  0.630
  0.660
  0.690
  0.710
  0.740
  0.770
  0.790
  0.810
  0.830
  0.860
  0.880
  0.890
  0.910
  0.930
  0.950
  0.960
  0.980
  0.990
  1.010
  1.020
  1.030
  1.040
  1.050
  1.060
Adjusted equity ratio
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  423
  445
  468
  493
  518
  545
  573
  603
  634
  667
  835
  872
  910
  950
  992
  1,036
  1,082
  1,131
  1,182
  1,236
  1,292
  1,351
  1,413
  1,479
  1,547
  1,619
  1,695
  1,774
  1,858
  1,945
Depreciation, amort., depletion, $m
  277
  282
  287
  292
  297
  302
  308
  314
  321
  328
  151
  158
  166
  174
  183
  192
  202
  212
  222
  233
  245
  257
  270
  283
  298
  312
  328
  344
  362
  380
Funds from operations, $m
  701
  727
  755
  784
  815
  848
  882
  917
  955
  995
  986
  1,030
  1,076
  1,124
  1,175
  1,228
  1,284
  1,343
  1,404
  1,469
  1,537
  1,608
  1,683
  1,762
  1,845
  1,932
  2,023
  2,119
  2,219
  2,325
Change in working capital, $m
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
Cash from operations, $m
  712
  739
  768
  798
  829
  862
  897
  934
  972
  1,013
  1,005
  1,050
  1,097
  1,146
  1,198
  1,252
  1,309
  1,369
  1,432
  1,499
  1,568
  1,641
  1,718
  1,798
  1,883
  1,971
  2,065
  2,162
  2,265
  2,373
Maintenance CAPEX, $m
  -90
  -94
  -98
  -103
  -108
  -113
  -119
  -125
  -131
  -137
  -144
  -151
  -158
  -166
  -174
  -183
  -192
  -202
  -212
  -222
  -233
  -245
  -257
  -270
  -283
  -298
  -312
  -328
  -344
  -362
New CAPEX, $m
  -68
  -74
  -78
  -82
  -86
  -91
  -95
  -100
  -105
  -111
  -116
  -122
  -128
  -135
  -142
  -149
  -156
  -164
  -173
  -181
  -190
  -200
  -210
  -221
  -232
  -243
  -255
  -268
  -282
  -296
Cash from investing activities, $m
  -158
  -168
  -176
  -185
  -194
  -204
  -214
  -225
  -236
  -248
  -260
  -273
  -286
  -301
  -316
  -332
  -348
  -366
  -385
  -403
  -423
  -445
  -467
  -491
  -515
  -541
  -567
  -596
  -626
  -658
Free cash flow, $m
  555
  572
  592
  613
  635
  658
  683
  709
  736
  765
  745
  777
  810
  845
  882
  920
  961
  1,003
  1,048
  1,095
  1,144
  1,196
  1,250
  1,308
  1,368
  1,431
  1,497
  1,566
  1,639
  1,716
Issuance/(repayment) of debt, $m
  137
  143
  150
  158
  166
  175
  184
  193
  203
  213
  224
  236
  248
  260
  273
  287
  302
  317
  333
  350
  367
  386
  405
  425
  447
  469
  493
  517
  543
  570
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  137
  143
  150
  158
  166
  175
  184
  193
  203
  213
  224
  236
  248
  260
  273
  287
  302
  317
  333
  350
  367
  386
  405
  425
  447
  469
  493
  517
  543
  570
Total cash flow (excl. dividends), $m
  692
  714
  742
  771
  801
  833
  867
  902
  939
  978
  970
  1,013
  1,058
  1,105
  1,155
  1,207
  1,262
  1,320
  1,381
  1,444
  1,511
  1,582
  1,655
  1,733
  1,814
  1,900
  1,989
  2,083
  2,182
  2,286
Retained Cash Flow (-), $m
  -105
  -112
  -118
  -124
  -130
  -137
  -144
  -151
  -159
  -167
  -176
  -184
  -194
  -204
  -214
  -225
  -236
  -248
  -260
  -274
  -287
  -302
  -317
  -333
  -350
  -367
  -385
  -405
  -425
  -446
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  587
  603
  624
  647
  671
  696
  723
  751
  780
  811
  794
  828
  864
  902
  941
  983
  1,026
  1,072
  1,120
  1,171
  1,224
  1,280
  1,338
  1,400
  1,465
  1,533
  1,604
  1,679
  1,757
  1,840
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  563
  552
  543
  533
  520
  505
  488
  469
  448
  425
  377
  353
  328
  303
  276
  250
  223
  197
  173
  149
  127
  106
  88
  71
  57
  45
  34
  26
  19
  14
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

GameStop Corp. is an omnichannel video game retailer. The Company sells video game hardware, physical and digital video game software, video game accessories, as well as mobile and consumer electronics products and other merchandise through its GameStop, EB Games and Micromania stores. It operates its business in five segments, which consists of four Video Game Brands segments: United States, Canada, Australia and Europe, and Technology Brands segment. Each of the Video Game Brands segments consists primarily of retail operations, with all stores engaged in the sale of new and pre-owned video game systems, software and accessories, which it refers to as video game products. Its Video Game Brands stores sell various types of digital products, including downloadable content, network points cards, prepaid digital, and also sell certain mobile and consumer electronics products and collectible products. Its Technology Brands segment includes its Spring Mobile and Simply Mac businesses.

FINANCIAL RATIOS  of  Gamestop Corporation (GME)

Valuation Ratios
P/E Ratio 1.6
Price to Sales 0.1
Price to Book 0.2
Price to Tangible Book
Price to Cash Flow 1
Price to Free Cash Flow 1.4
Growth Rates
Sales Growth Rate -8.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -17.3%
Cap. Spend. - 3 Yr. Gr. Rate 2.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 36.2%
Total Debt to Equity 36.2%
Interest Coverage 23
Management Effectiveness
Return On Assets 7.9%
Ret/ On Assets - 3 Yr. Avg. 9%
Return On Total Capital 12.8%
Ret/ On T. Cap. - 3 Yr. Avg. 15.4%
Return On Equity 16.3%
Return On Equity - 3 Yr. Avg. 18%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 35%
Gross Margin - 3 Yr. Avg. 32%
EBITDA Margin 8.1%
EBITDA Margin - 3 Yr. Avg. 8.3%
Operating Margin 6.5%
Oper. Margin - 3 Yr. Avg. 6.7%
Pre-Tax Margin 5.9%
Pre-Tax Margin - 3 Yr. Avg. 6.4%
Net Profit Margin 4.1%
Net Profit Margin - 3 Yr. Avg. 4.2%
Effective Tax Rate 30.1%
Eff/ Tax Rate - 3 Yr. Avg. 33.7%
Payout Ratio 44.2%

GME stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GME stock intrinsic value calculation we used $9225 million for the last fiscal year's total revenue generated by Gamestop Corporation. The default revenue input number comes from 0001 income statement of Gamestop Corporation. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our GME stock valuation model: a) initial revenue growth rate of 4.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for GME is calculated based on our internal credit rating of Gamestop Corporation, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Gamestop Corporation.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of GME stock the variable cost ratio is equal to 93.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for GME stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 7% for Gamestop Corporation.

Corporate tax rate of 27% is the nominal tax rate for Gamestop Corporation. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the GME stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for GME are equal to 15.9%.

Life of production assets of 16.4 years is the average useful life of capital assets used in Gamestop Corporation operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for GME is equal to -2.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $2214.5 million for Gamestop Corporation - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 102.170 million for Gamestop Corporation is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Gamestop Corporation at the current share price and the inputted number of shares is $0.6 billion.

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