Multiplayer online games

Which gaming action is a better buy?


Based in Seoul, South Korea, Gravity Co., Ltd. (GRVY) develops, publishes and distributes online games internationally. It offers multiplayer online role-playing games that include Ragnarok Online, Requiem, and Dragonica. In comparison, Skillz Inc. (SKLZ) primarily develops and supports a proprietary technology platform hosted online that enables independent game developers to host tournaments and deliver competitive gaming activities to end users around the world. .

The gaming industry saw an increase in its consumer base last year as people spent significantly more time at home due to the lockdown demands of the COVID-19 pandemic. And while the current semiconductor shortage and consumer orientation towards outdoor pursuits could affect the gaming industry in the near term, the growing demand for online, mobile and cloud gaming is expected to drive growth in the near future. long term. According to a Fortune Business Insights report, the global gaming market is expected to grow at a 13.2% CAGR between 2021 and 2028. Therefore, GRVY and SKLZ should benefit from it.

But while GRVY’s stock has gained 5.4% in price over the past three months, SKLZ has lost value. However, SKLZ’s 2.5% gains over the past year are greater than the negative returns of GRVY. Additionally, SKLZ is the clear winner with price gains of 54% over GRVY’s 15.6% returns in terms of performance last month.

Click here to view our Video Game Industry Report for 2021

But which of these two titles is the best buy now? Let’s find out.

Latest developments

On November 5, 2021, GRVY announced that it has unveiled the full list of games for G-STAR 2021 and opened an official website. It plans to open large-scale booths at G-STAR 2021 and showcase 13 titles, including IP-based Ragnarok games and upcoming launches from the second half of 2021 and 2022.

On October 23, 2021, Kaskela Law LLC announced that it SKLZ survey on concerns as to whether the board of directors of the company breached its fiduciary duties or violated securities laws in connection with its alleged dissemination of misleading or inaccurate information about the company.

Recent financial results

GRVY’s revenue decreased 5.5% year-on-year to $ 73.97 million for its fiscal second quarter, ended June 30, 2021. However, its operating profit increased 17.4% year on year to reach $ 16.95 million, while its net profit increased 13.6% to reach $ 16.95 million. $ 13.11 million. In addition, the company’s EPS stood at $ 1.88, up 12.8% year-over-year.

SKLZ’s revenue increased 70% year-on-year to $ 102.07 million for its fiscal third quarter ended September 30, 2021. The company’s gross profit increased 66% year-on-year to 94.40 million dollars, while its net profit amounted to 50.78 million dollars. against a loss of $ 42.85 million in the previous year quarter. Also, its EPS was $ 0.16 compared to a loss of $ 0.14 per share during the period last year.

Profitability

The turnover of the last 12 months of GRVY is 1.12 times that of SKLZ. GRVY is also more profitable, with EBITDA and net income margins of 25.68% and 18.17%, respectively, compared to the negative returns of SKLZ.

In addition, the respective ROE, ROA and ROTC of 44.04%, 27.69% and 38.47% of GRVY compare to negative values ​​of SKLZ.

Evaluation

In terms of 12-month rolling EV / S, SKLZ is currently trading at 13.09x, which is 821.8% higher than GRVY’s 1.42x. And SKLZ’s 13.10x 12-month rolling P / S ratio is 600.5% higher than GRVY’s 1.87x.

So, GRVY is relatively affordable here.

POWR odds

GRVY has an overall rating of B, which is equivalent to a purchase in our proprietary POWR rating system. In comparison, SKLZ has an overall F rating, which translates into a strong sale. POWR scores are calculated taking into account 118 separate factors, each factor being weighted to an optimal degree.

GRVY has an A rating for value, consistent with its 12-month rolling EV / S of 1.42x, which is 46.5% lower than the industry’s 2.65x. However, SKLZ has a D rating for value, which is in line with its 12-month rolling EV / S of 13.09x, which is 394.5% higher than the 2.65x industry average.

Additionally, GRVY has a B grade for quality. This is justified given GRVY’s 12-month rolling ROTA of 27.50%, which is 817.8% above the industry average of 3%. In comparison, SKLZ has a quality rating of D, which is in line with its negative 12-month ROTA compared to the industry average of 3%.

Of the 23 entertainment industry stocks ranked B – Toys and Video Games, GRVY is ranked No.5 while SKLZ is ranked last.

Beyond what I stated above, we also rated stocks for growth, stability, sentiment and momentum. Click here to view all GRVY ratings. Also get all SKLZ ratings here.

The winner

The gaming industry is expected to grow in the short term despite the reopening of the economy and the refocus on outdoor activities. While GRVY and SKLZ should benefit from favorable industry winds, we believe it is better to bet on GRVY now due to its lower valuation and higher profit margin.

Our research shows that the chances of success increase when investing in stocks with an overall strong buy or buy rating. Check out all the other top rated stocks in the Entertainment – Toys & Video Games sector here.

Click here to view our Video Game Industry Report for 2021


Shares of GRVY were trading at $ 112.39 per share on Thursday afternoon, up $ 8.87 (+ 8.57%). Year-to-date, GRVY is down -37.82%, compared to a 25.39% increase in the benchmark S&P 500 over the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal’s a passionate interest in the analysis and interpretation of financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach he takes while advising investors in his articles. Following…

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