The Zynga IPO will hit the market most likely on December 15th which will also shift focus to other listed gaming companies and their valuations. Therefore, we have put together a peer group valuation table for the sector. All these companies benefit in one way or the other from the mobile and social gaming trend which experiences rapid growth. Our best guess is that the whole sector will benefit from the Zynga IPO in terms of multiple expansion. Within the sector, we would clearly favour G5 Entertainment due to its rapid growth and stellar profitability. G5 trades at the lowest 12m forward PE-ratio and top of all, its expected earnings growth rate is by far the highest (based on G5’s own growth target and available analyst consensus estimates for the peers). The price-earnings-growth-ratio (PEG), which puts the PE-ratio in relation to the expected earnings growth rate, is around 0.1 times – a clear bargain.
I am long G5 Entertainment and you should be too!