Analyzing Electronic Arts (NASDAQ:EA) and GameStop (NYSE:GME)

Electronic Arts (NASDAQ:EA) and GameStop (NYSE:GME) are both consumer discretionary companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, earnings, analyst recommendations, institutional ownership, profitability, valuation and risk.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Electronic Arts and GameStop, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Electronic Arts	1	17	2	0	2.05
GameStop	1	1	0	0	1.50

Electronic Arts currently has a consensus target price of $196.64, indicating a potential downside of 3.95%. Given Electronic Arts’ stronger consensus rating and higher probable upside, research analysts plainly believe Electronic Arts is more favorable than GameStop.

Valuation & Earnings

This table compares Electronic Arts and GameStop”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Electronic Arts	$7.53 billion	6.82	$887.00 million	$3.49	58.66
GameStop	$3.63 billion	2.60	$418.40 million	$1.32	15.91

Electronic Arts has higher revenue and earnings than GameStop. GameStop is trading at a lower price-to-earnings ratio than Electronic Arts, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Electronic Arts and GameStop’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Electronic Arts	11.78%	23.41%	11.71%
GameStop	20.45%	13.75%	7.08%

Risk and Volatility

Electronic Arts has a beta of 0.65, meaning that its share price is 35% less volatile than the S&P 500. Comparatively, GameStop has a beta of 1.77, meaning that its share price is 77% more volatile than the S&P 500.

Institutional and Insider Ownership

90.2% of Electronic Arts shares are owned by institutional investors. Comparatively, 29.2% of GameStop shares are owned by institutional investors. 0.2% of Electronic Arts shares are owned by insiders. Comparatively, 9.5% of GameStop shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Summary

Electronic Arts beats GameStop on 11 of the 14 factors compared between the two stocks.

About Electronic Arts

Electronic Arts Inc. develops, markets, publishes, and distributes games, content, and services for game consoles, PCs, mobile phones, and tablets worldwide. It develops and publishes games and services across various genres, such as sports, racing, first-person shooter, action, role-playing, and simulation primarily under the Battlefield, The Sims, Apex Legends, Need for Speed, and license games from others, including FIFA, Madden NFL, UFC, and Star Wars brands. The company licenses its games to third parties to distribute and host its games. It markets and sells its games and services through digital distribution and retail channels, as well as directly to mass market retailers, specialty stores, and distribution arrangements. Electronic Arts Inc. was incorporated in 1982 and is headquartered in Redwood City, California.

About GameStop

GameStop Corp., a specialty retailer, provides games and entertainment products through its stores and ecommerce platforms in the United States, Canada, Australia, and Europe. The company sells new and pre-owned gaming platforms; accessories, such as controllers, gaming headsets, and virtual reality products; new and pre-owned gaming software; and in-game digital currency, digital downloadable content, and full-game downloads. It sells collectibles comprising apparel, toys, trading cards, gadgets, and other retail products for pop culture and technology enthusiasts, as well as engages in the digital asset wallet and NFT marketplace activities. The company operates stores and ecommerce sites under the GameStop, EB Games, and Micromania brands; and pop culture themed stores that sell collectibles, apparel, gadgets, electronics, toys, and other retail products under the Zing Pop Culture brand, as well as offers Game Informer magazine, a print and digital gaming publication. The company was formerly known as GSC Holdings Corp. GameStop Corp. was founded in 1996 and is headquartered in Grapevine, Texas.