Latest Zynga Inc. (ZNGA) company news
In the previous part of this series, we saw that the global games market is estimated to rise 13.3% YoY (year-over-year) in 2018. We’ll now see how much revenue growth gaming companies are expecting.
In this series, we’ll look at the performance of top gaming companies in the United States and some of their key growth drivers. We’ll look at Activision Blizzard (ATVI), Zynga (ZNGA), Take-Two Interactive (TTWO), and Electronic Arts (EA). Activision Blizzard has a market cap of $58 billion. In the last 12 months, the stock generated returns of 25%, while in the last month it rose 6.4%. In 2017, ATVI rose 76%, while it has risen over 20% in 2018.
The content of this article will benefit those of you who are starting to educate yourself about investing in the stock market and want to better understand how you can grow your money by investing in Zynga Inc (NASDAQ:ZNGA).
Zynga Inc (NASDAQ:ZNGA) is trading with a trailing P/E of 87.3x, which is higher than the industry average of 37x. Although some investors may jump to the conclusion that you should avoid the stock or sell if you own it, understanding the assumptions behind the P/E ratio might change your mind. Today, I will explain what the P/E ratio is as well as what you should look out for when using it. View out our latest analysis for Zynga
What you need to know about the P/E ratio
P/E is a popular ratio used for relative valuation. By comparing a stock’s price per share to its earnings per share, we are able to see how much investors are paying for each dollar of the company’s earnings.
P/E Calculation for ZNGA
Price-Earnings Ratio = Price per share ÷ Earnings per share
ZNGA Price-Earnings Ratio = $4.2 ÷ $0.0481 = 87.3x
On its own, the P/E ratio doesn’t tell you much; however, it becomes extremely useful when you compare it with other similar companies. We preferably want to compare the stock’s P/E ratio to the average of companies that have similar features to ZNGA, such as capital structure and profitability. A quick method of creating a peer group is to use companies in the same industry, which is what I will do. ZNGA’s P/E of 87.3x is higher than its industry peers (37x), which implies that each dollar of ZNGA’s earnings is being overvalued by investors. Therefore, according to this analysis, ZNGA is an over-priced stock.
Assumptions to watch out for
Before you jump to the conclusion that ZNGA should be banished from your portfolio, it is important to realise that our conclusion rests on two assertions. Firstly, our peer group contains companies that are similar to ZNGA. If this isn’t the case, the difference in P/E could be due to other factors. For example, if you compared lower risk firms with ZNGA, then investors would naturally value it at a lower price since it is a riskier investment. The second assumption that must hold true is that the stocks we are comparing ZNGA to are fairly valued by the market. If this is violated, ZNGA’s P/E may be lower than its peers as they are actually overvalued by investors.
What this means for you:
You may have already conducted fundamental analysis on the stock as a shareholder, so its current overvaluation could signal a potential selling opportunity to reduce your exposure to ZNGA. Now that you understand the ins and outs of the PE metric, you should know to bear in mind its limitations before you make an investment decision. Remember that basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PE ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for ZNGA’s future growth? Take a look at our free research report of analyst consensus for ZNGA’s outlook.
- Past Track Record: Has ZNGA been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of ZNGA’s historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
Today -- Friday, June 22, 2018 -- is Take Your Dog to Work Day, the 20th annual day that raises awareness and funds to support animal rescue and shelter dog adoption. But some pet-friendly companies have already gone to the dogs.
These companies allow you to take your dog to work every day of the year. While plenty of companies offer perks like gym memberships and subsidized childcare, many also recognize that, especially for pet-loving millennials, dogs are part of the family, too.
Pet-friendly companies with open door policies that let dog owners to take their dogs to work often cite benefits such as a stress relief as one of the reasons for allowing dogs in the office. Some also highlight that dogs at work help employees break the ice during tense meetings and encourage more friendly socializing in the office.
Take Your Dog to Work Day caps an entire Take Your Pet to Work Week, including the much more complicated-sounding Take Your Cat to Work Day (celebrated on June 18 this year.)
Here are 10 pet-friendly companies where every day is Take Your Dog to Work Day.
You can take your dog to work every day at the Grand Rapids, Mich., headquarters of this privately-owned pet-friendly home care company. Seventy percent of Bissell employees are pet owners, and in 2011, Cathy Bissell started the Bissell Pet Foundation to promote and support spay-neuter programs and shelter pet adoption. Bissell, the wife of CEO Mark, notes that in 2017 alone, the foundation raised over $1 million.
The Seattle-based e-commerce giant is proud of its take your dog to work policy, often highlighting the more than 6,000 dogs that accompany their humans to work every day at Amazon’s facilities. Amazon has been dog-friendly from day one and its first company pet, a corgi named Rufus, has an Amazon building named in his honor.
At this pet-friendly game design HQ, where founder Mark Pincus’ late bulldog is immortalized in the company logo, pet insurance for dogs is offered along with healthcare coverage for humans. When Zynga employees take their dogs to work, there are free treats for the dogs on hand. There’s even a small play area on the roof of the Zynga building in San Francisco for the dogs.
4. Nestle Purina
The Nestle subsidiary known for pet food and products knows a thing or two about keeping dogs and their owners happy, which is why the pet-friendly company allows employees to take their dogs to work. Taking the dog out promotes movement throughout the day, and Nestle Purina also emphasizes the de-stressing nature of having a dog next to your desk.
What’s better than a sales force? How about a Puppyforce? That’s what you’ll find at this pet-friendly business software giant, which encourages a handful of employees and their dogs to co-work in an open space that’s part office, part doggy daycare.
Obviously, this pet supply chain encourages employees to pamper their pets and take their dogs with them to work. PetSmart also offers associates discounts on merchandise and dog grooming, as well as free training classes for dogs.
7. Google (owned by parent company Alphabet)
Long known for its industry-standard office perks, has fondness for its so-called Dooglers -- dog-owning Googlers -- written right into its corporate code of conduct. “Google's affection for our canine friends is an integral facet of our corporate culture,” the policy notes. If you take your dog to Google’s Mountain View, Calif., campus, your pup will even get a badge.
The HR software company, based in Pleasanton, Calif., says taking dogs to work can “keep the mood light” and WorkDay even offers financial assistance to employees looking to adopt a shelter dog.
Not only are Zoosk employees’ dogs welcome every day at this dating site’s office. There’s an award presented each month to one special dog at work.
Take your dog to work at this pet-friendly ticketing giant, and rest assured your pup is well, too. Ticketmaster offers pet insurance for all employees’ dogs.
For an extra dose of cute at work, here are how some other companies are celebrating Take Your Dog to Work Day this year:
— MC Construction (@construction_mc) June 22, 2018
— akp Scotland Limited (@akpscotland) June 22, 2018
We're celebrating Take Your Dog To Work Day today with some of the our very own VicHealth pooches! Bringing pets to work is a great way to reduce stress in the office and also promotes paws-itive interactions between staff! #TakeYourDogToWorkDay #DogsAtWork #TYDTWD pic.twitter.com/HdVgSeoUki
— VicHealth (@VicHealth) June 22, 2018
— CLIF Bar (@ClifBar) June 22, 2018
— Tammy Ven Dange (@tvendange) June 22, 2018
— Gill Frood (@GillFrood) June 22, 2018
Servpro of Virginia Beach celebrates Take Your Dog to Work Day everyday! Meet Rhett and Bella and read about their important duties on our websites staff page https://t.co/CwGgAIAxFH #takeyourdogtoworkday #topdogs #woofwoof pic.twitter.com/rGdX2XFwVQ
— Servpro of VA Beach (@SERVPROofVABCH) June 22, 2018
— Sabal Chase Vet (@SabalChaseVet) June 22, 2018
More from Fortune.com
Glu Mobile Inc. (NASDAQ:GLUU) has seen a huge move higher. Increased revenue amid the popularity of some of its older games has bolstered the Glu Mobile stock. Now, as it approaches multi-year highs, investors must decide whether Glu can keep increasing its revenue and push the value of the stock past highs not seen since 2015.
Unfortunately for GLUU stock, its trading history has resembled that of its peer Zynga (NASDAQ:ZNGA) rather than more established gaming companies such as Activision Blizzard (NASDAQ:ATVI) or Electronic Arts (NASDAQ:EA). Like Zynga, it surged higher after its IPO only to fall back.
The fallout from a financial crisis took Glu Mobile stock as low as 22 cents per share. It recovered and then came back from a mid-decade slump which took the stock below $2 per share. Now, as it returns to multi-year highs, many wonder what will come next for Glu.
Glu Mobile Stock Outlook Improvements
In fairness, GLUU stock has seen improvement in recent quarters. It missed earnings in Q1, reporting a 5-cent per share loss when a gain was expected. However, Glu still improved from a 17-cent per share loss in the same quarter one year ago.
The company also reported $81.4 million in revenue for the same quarter. This beat estimates by $7.64 million and represented a 43.3% increase from year-ago levels.
Forecasts have also become more optimistic. Overall for the year, Wall Street predicts a profit of 5 cents per share. Analysts expect this profit to rise to 12 cents per share in 2019. Likewise, they expect revenues to increase by about 14.9% in 2018 and about 11.7% in 2019.
Still, GLUU Has a Lot to Prove
The problem lies in how dependent the future of Glu Mobile stock has become on that improvement. In past quarters, revenues have fallen short of producing the funds needed to pay both its research and development (R&D) costs and its sales, general, and administrative expenses.
While the company continues to release new titles, the majority of its revenue comes from existing games such as Design Home, Tap Sports Baseball, and Covet Fashion. Glu has to spend heavily on marketing expenses to maintain the revenue stream that comes from its existing games. Its future also depends on leveling up R&D to find its next hit game. This game has not yet emerged.
Furthermore, the charts do not look favorable for Glu Mobile stock. The equity saw a high of $6.84 in 2015. It has not traded higher than that level since soon after its 2007 IPO. If the stock can surpass this multi-year high, it could be poised for a much higher move. However, it will likely take a new hit game to make such a breakthrough possible.
Final thoughts on GLUU stock
The continuing success of GLUU stock will rely on unknowns. To be sure, the stock has risen as the company sees revenues rise with the popularity of its top three games. Unfortunately, this revenue relies on older games which require a large amount of marketing-related spending. Moreover, that next big game has yet to emerge from their R&D spending.
Hence, the situation leaves me with the same conclusion that my colleague Josh Enomoto reached in his recent assessment of Glu Mobile. Glu has become what he calls a “speculative bet” on whether it can create the next big thing in mobile gaming. I do not see a path higher without that new game emerging.
For this reason, buyers should only purchase GLUU stock with gambling money. A marketing success with a new product would bring GLUU investors huge winnings. Then again, the same kind of win might happen at the horse track or the roulette table. Without such a win, GLUU will struggle to level up.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.
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