Industry Comparison: Evaluating GameStop Against Competitors In Specialty Retail Industry

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In the fast-paced and cutthroat world of business, conducting thorough company analysis is essential for investors and industry experts. In this article, we will undertake a comprehensive industry comparison, evaluating GameStop GME in comparison to its major competitors within the Specialty Retail industry. By analyzing crucial financial metrics, market position, and growth potential, our objective is to provide valuable insights for investors and offer a deeper understanding of company's performance in the industry.

GameStop Background

GameStop Corp is a U.S. multichannel video game, consumer electronics, and services retailer. The company operates across Europe, Canada, Australia, and the United States. GameStop sells new and second-hand video game hardware, physical and digital video game software, and video game accessories, mainly through GameStop, EB Games, and Micromania stores and international e-commerce sites. The majority of sales are from the United States.

Company P/E P/B P/S ROE EBITDA (in billions) Gross Profit (in billions) Revenue Growth
GameStop Corp 1062 5.57 1.23 4.85% $0.08 $0.42 -19.44%
Best Buy Co Inc 12.66 5.10 0.36 15.69% $0.82 $3.0 -0.6%
Smart Share Global Ltd 23.19 0.74 0.69 0.09% $0.0 $0.29 -18.3%
Average 17.93 2.92 0.52 7.89% $0.41 $1.65 -9.45%

By conducting a comprehensive analysis of GameStop, the following trends become evident:

  • At 1062.0, the stock's Price to Earnings ratio significantly exceeds the industry average by 59.23x, suggesting a premium valuation relative to industry peers.

  • With a Price to Book ratio of 5.57, which is 1.91x the industry average, GameStop might be considered overvalued in terms of its book value, as it is trading at a higher multiple compared to its industry peers.

  • The Price to Sales ratio of 1.23, which is 2.37x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.

  • The Return on Equity (ROE) of 4.85% is 3.04% below the industry average, suggesting potential inefficiency in utilizing equity to generate profits.

  • Compared to its industry, the company has lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $80 Million, which is 0.2x below the industry average, potentially indicating lower profitability or financial challenges.

  • The company has lower gross profit of $420 Million, which indicates 0.25x below the industry average. This potentially indicates lower revenue after accounting for production costs.

  • The company's revenue growth of -19.44% is significantly lower compared to the industry average of -9.45%. This indicates a potential fall in the company's sales performance.

Debt To Equity Ratio

The debt-to-equity (D/E) ratio helps evaluate the capital structure and financial leverage of a company.

Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company's financial health and risk profile, aiding in informed decision-making.

In terms of the Debt-to-Equity ratio, GameStop can be assessed by comparing it to its top 4 peers, resulting in the following observations:

  • Among its top 4 peers, GameStop is placed in the middle with a moderate debt-to-equity ratio of 0.45.

  • This implies a balanced financial structure, with a reasonable proportion of debt and equity.

Key Takeaways

The high PE, PB, and PS ratios of GameStop suggest that the company is relatively overvalued compared to its peers in the Specialty Retail industry. On the other hand, the low ROE, EBITDA, gross profit, and revenue growth indicate that GameStop may be facing challenges in generating profits and growth when compared to its industry counterparts.

This article was generated by Benzinga's automated content engine and reviewed by an editor.

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