Activision Blizzard (ATVI, Financial) has been experiencing a steady growth in the stock market, with a daily gain of 1.7% and a 3-month gain of 15.35%. The Earnings Per Share (EPS) stands at 2.73. But is the stock fairly valued? This article dives into an in-depth analysis of Activision Blizzard's intrinsic value, financial strength, and growth potential.
A Snapshot of Activision Blizzard
Formed in 2008 through the merger of Activision and Blizzard, Activision Blizzard Inc (ATVI, Financial) has grown to be one of the world's largest video game publishers. The company boasts an impressive franchise portfolio, including World of Warcraft and Call of Duty. With a current stock price of $93.92 and a GF Value of $90.9, Activision Blizzard (ATVI) appears to be fairly valued.
Understanding the GF Value of Activision Blizzard
The GF Value is a unique valuation model that takes into account historical multiples, an adjustment factor based on past performance and growth, and future business performance estimates. This model suggests that Activision Blizzard (ATVI, Financial), with a market cap of $73.90 billion, is fairly valued. As such, the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength of Activision Blizzard
Investing in companies with low financial strength can lead to potential capital loss. Therefore, it's crucial to assess a company's financial strength before purchasing its shares. Activision Blizzard has a cash-to-debt ratio of 3.62, ranking it lower than 57.82% of 569 companies in the Interactive Media industry. Despite this, GuruFocus ranks Activision Blizzard's financial strength as 8 out of 10, indicating a strong balance sheet.
Profitability and Growth of Activision Blizzard
Investing in profitable companies carries less risk, especially those that demonstrate consistent profitability over the long term. Activision Blizzard has been profitable 10 years over the past 10 years, with revenues of $8.70 billion and Earnings Per Share (EPS) of $2.73 in the past 12 months. Its operating margin of 25.71% is better than 87.01% of 585 companies in the Interactive Media industry, earning it a strong profitability rank from GuruFocus.
However, growth is a critical factor in a company's valuation. The growth of Activision Blizzard is slower than 58.83% of 515 companies in the Interactive Media industry, with a 3-year average annual revenue growth of 4.3% and a 3-year average EBITDA growth rate of -2.3%.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) can provide insights into its profitability. For the past 12 months, Activision Blizzard's ROIC is 13.17, and its WACC is 6.16, indicating that the company is creating value for shareholders.
Conclusion
In conclusion, Activision Blizzard (ATVI, Financial) stock appears to be fairly valued. The company's financial condition is strong, and its profitability is robust. However, its growth ranks lower than 62.79% of 387 companies in the Interactive Media industry. To learn more about Activision Blizzard stock, you can check out its 30-Year Financials here.
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