GameStop Story

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GME -- USA Stock  

USD 65.01  21.98  51.08%

GameStop is scheduled to announce its earnings today. The next earnings report is expected on the 25th of March 2021. The stock experiences above-average trading activities. While some baby boomers are getting worried about consumer cyclical space, it is reasonable to digest GameStop as an investment alternative. We will discuss if it could be a much better year for GameStop shareholders.
Published over a month ago
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Should I hold on to my GameStop (NYSE:GME) position?
GameStop has 1.17 B in debt with debt to equity (D/E) ratio of 3.31, meaning that the entity heavily relies on borrowing funds for operations. The entity has a current ratio of 1.03, demonstrating that it is not liquid enough and may have problems paying out its financial commitments when the payables are due. About 25.0% of the company shares are held by company insiders. The book value of GameStop was currently reported as 5.4. GameStop has Price/Earnings To Growth (PEG) ratio of 0.17. The entity recorded a loss per share of 4.9. The firm last dividend was issued on the 14th of March 2019. GameStop had 2:1 split on the 19th of March 2007.
GameStop financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of GameStop, including all of GameStop's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of GameStop assets, the company is considered highly leveraged. Understanding the composition and structure of overall GameStop debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business is and if it is worth investing in it. Please read more on our technical analysis page.

Understanding GameStop Total Liabilities

GameStop liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. GameStop has to fulfill its short-term liabilities in this reporting year and should be no more than 12 months old. Long-term debt, on the other hand, is anything beyond the 12-month payment timeframe. Common short-term liabilities found on GameStop balance sheet include debt obligations and money owed to different GameStop vendors, workers, and loan providers. Below is the chart of GameStop short long-term liabilities accounts currently reported on its balance sheet.
You can use GameStop financial leverage analysis tool to get a better grip on understanding its financial position

How important is GameStop's Liquidity

GameStop financial leverage refers to using borrowed capital as a funding source to finance GameStop ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. GameStop financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Please check the breakdown between GameStop's total debt and its cash.

Another Deeper Perspective

The firm reported the last year's revenue of 5.6 B. Reported Net Loss for the year was (334.4 M) with profit before taxes, overhead, and interest of 1.91 B.

Liabilities Breakdown

1.5 B
Current Liabilities
794.4 M
Long-Term Liabilities
Total Liabilities2.31 Billion
Current Liabilities1.51 Billion
Long-Term Liabilities794.42 Million
Tax Liabilities99.68 Million

GameStop implied volatility may change after the surge

The downside deviation is down to 5.91 as of today. GameStop is displaying above-average volatility over the selected time horizon. Investors should scrutinize GameStop independently to ensure intended market timing strategies are aligned with expectations about GameStop volatility.

The Bottom Line

Although some other firms within the specialty retail industry are still a little expensive, even after the recent corrections, GameStop may offer a potential longer-term growth to shareholders. In closing, as of the 8th of December 2020, our final 30 days buy vs. sell advice on the firm is Hold. We believe GameStop is currently overvalued with below average chance of distress for the next two years.

About Contributor

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Achuva Shats do not own shares of GameStop. Please refer to our Terms of Use for any information regarding our disclosure principles.

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