By the numbers
Although Take-Two Interactive Software, Inc. (NASDAQ:TTWO) might appear to have good growth potential as the cheapest of these companies, it still has a ways to go for a full turnaround. When stacking up EA and Activision, it appears Activision could be the best buy.
Electronic Arts Inc. (NASDAQ:EA) trades at 19.8 times forward earnings, while Activision is at 14.3 times. EA trades at a 11.3 EV/EBITDA multiple as well, while Activision Blizzard, Inc. (NASDAQ:ATVI) trades at an 8. What makes Activision’s case even greater is the fact that it has a return on investment of 10.6% while EA’s is only 3.5%.
As mentioned before, Activision also has a solid cash position that it can use to make strategic investments. Its cash-per-share to price ratio is 26.6%, compared to 22.5% for EA.
Hedge fund trading
At the end of 2012, Activision had 25 hedge funds long on the stock. This includes its top hedge fund owner by market value, Levin Capital Strategies, with a $57 million position that made up 1.1% of its 13F portfolio (check out Levin’s high yielders).
In a close second was Electronic Arts Inc. (NASDAQ:EA), with 24 hedge funds long on the stock. The top hedge fund owner was Larry Robbins’ Glenview Capital, with a position close to $118 million that accounted for 1.7% of its 13F portfolio (check out Glenview’s healthcare picks).
Meanwhile, Take-Two Interactive Software, Inc. (NASDAQ:TTWO) had the lowest amount of interest, with 19 hedge funds long on the stock which was a 21% decrease from the previous quarter. Billionaire Carl Icahn was the top hedge fund owner, however, with a $132 million position that made up 1% of the fund’s 13F portfolio (check out Icahn’s small cap picks).
Bottom line
If you want to invest in the gaming industry, the question is which company is the best pick for the job? I think EA appears to be too rich, especially after its recent run up, despite its deal with Disney to produce “Star Wars” games. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) still has a little too much uncertainty related to its over-reliance on GTA V in the interim. Activision Blizzard, Inc. (NASDAQ:ATVI), meanwhile, appears to be rather cheap for its value and has a large chunk of cash that it plans to put to work for investors. I would go for Activision, which still has a lot of room to grow in the digital space as well.
The article Is It Time To Get Your Game On? originally appeared on Fool.com and is written by Marshall Hargrave.
Marshall Hargrave has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard and Take-Two Interactive . The Motley Fool owns shares of Activision Blizzard. Marshall is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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