What Will Stop GameStop Corp. (GME)?

From both a profitability and debt position, GameStop outshines both major competitors.

GameStop	Best Buy	RadioShack
EBITDA Margin	9.0%	4.5%	0.7%
Debt to Capital	0.0%	37.0%	56.0%

Yet, GameStop still lacks the respect it deserves. GameStop trades at a lower forward P/E multiple than Best Buy, but its expected growth is much more robust.

	GameStop	Best Buy
Forward P/E	8.7	11.5
5-Yr. Expected EPS Growth	10.0%	3.3%

Bottom line

GameStop no doubt has uncertainty related to the specifics on how the console makers plan to offer games, whether it be a move toward more digital or the prevention of sharing hard-packaged games. However, I think the recent sell-off is an overreaction. RadioShack and Best Buy are currently battling each other in a race to mobile, leaving GameStop Corp. (NYSE:GME) as the premier company for gaming.

Given GameStop’s current dividend yield and valuation, I think the downside is limited. In addressing the 25% of sales from used games, even if we assume fiscal 2015 EPS (January 2015) comes in 20% below analyst estimates at a P/E ratio of 11.5, GameStop would still manage to trade at current levels in 21 months.