Stocks & Investing
Stocks and Investing
Stocks and Investing
Wed, January 26, 2011 
January 26, 2011 / M2 PRESSWIRE / BUYINS.NET / http://www.squeezetrigger.com is monitoring the Toys and Games sector and these stocks are the most undervalued as of today. ACTIVISION BLIZZARD INC (NASDAQ:ATVI), ELECTRONIC ARTS INC (NASDAQ:ERTS) are all expected to go Up as they are undervalued according to industry standard valuation metrics. The valuation model employs a three-factor approach to stock valuation using fundamental variables--the company's trailing 12-month Earnings-Per-Share (EPS), the analyst consensus estimate of the company's forecasted 12-month EPS, and the 30-year Treasury yield--to create a highly accurate reflection of a company's fair value.
The chart below displays the projected Fair Value and Valuation discount/premium of the most undervalued stocks in the highlighted industry group:
Symbol Company Name Last Close Fair Value Valuation Industry
ATVI ACTIVISION BLIZZARD INC 11.43 13.51 15.42% undervalued Toys and Games
ERTS ELECTRONIC ARTS INC 15.375 27.21 43.49% undervalued Toys and Games
Here are some of the variables that are utilized when calculating the Fair Market Valuation of a stock: Long-run EPS growth rate, Duration of Business-growth-cycle, Volatility of EPS growth rate, Systematic or beta risk of the firm, Correlation between the firm's EPS and the interest rate environment, EPS growth volatility, Dividend payout ratio, Buffer earnings, Interest rate related criteria: Interest rate (30 year yield) long-run level, Duration of interest rate cycle, Interest rate volatility. The Fair Market Valuation uses 12-month historic and forecasted EPS values and the current 30-year treasury yield as primary determinants. When calculating risk/return values such as the Sharpe ratio, the historic periods used are five years.
Some expected results of the Valuation Model are: the valuation of a stock increases in a declining interest rate environment. Increasing current and/or projected EPS will produce a higher Valuation. While long-term EPS growth would produce a corresponding long-term Valuation increase, concomitant long-term interest rate increases would offset EPS growth and depress the Valuation. The shorter a company's own business cycle, the higher its stock Valuation will be.
ACTIVISION BLIZZARD INC (NASDAQ:ATVI) - Activision Blizzard, Inc., through its subsidiaries, publishes online, personal computer (PC), console, and handheld games worldwide. The company develops and publishes PC-based computer games and maintains its proprietary online-game related service, Battle.net. It publishes interactive software products and peripherals. Its products cover various game categories, such as action/adventure, action sports, racing, role-playing, simulation, first-person action, music, and strategy. Activisions products comprise Monsters vs. Aliens, Guitar Hero, X-Men Origins, PROTOTYPE, Transformers, Ice Age, Wolfenstein, Marvel Ultimate Alliance, Bakugan Battle Brawlers, DJ Hero, Band Hero, Call of Duty, Tony Hawk, Guitar Hero, Three map packs for Call of Duty, True Crime, Spider-Man, Bakugan, Blur, and Singularity. Its customers include retail outlets and distributors, including mass-market retailers, consumer electronics stores, discount warehouses, and game specialty stores. Activision Blizzard, Inc. is based in Santa Monica, California.
ELECTRONIC ARTS INC (NASDAQ:ERTS) - Electronic Arts Inc. develops, markets, publishes, and distributes video game software and content. The companys games include a range of categories, including action-adventure, casual, sports, family, fantasy, racing, music, massively-multiplayer online role-playing, simulation, and strategy. Its portfolio of properties includes various brands, such as Need for Speed, The Sims, Spore, Dead Space, Mass Effect, and Battlefield; and EA SPORTS Active, Dragon Age, Origins, and Dantes Inferno. The companys portfolio of games based on licensed intellectual property includes sports-based titles, such as Madden NFL Football, FIFA Soccer, and Tiger Woods PGA Tour, as well as titles based on brands, such as Harry Potter and Hasbro. It also co-develops, co-publishes, and/or distributes video games that are developed and published by other companies, including the MTV Games/Harmonix series Rock Band and the Crytek series Crysis. The companys games are played on various platforms, including video game consoles, personal computers, handheld game players, and mobile devices. It offers its products for videogame consoles, PCs, and handhelds on physical media, such as disks and cartridges that are sold at retailers; and game content and services online. The company provides its products through mass market retailers, electronics specialty stores, game software specialty stores, and online stores. It has operations in North America, Europe, Australia, Asia, and Latin America. Electronic Arts Inc. was founded in 1982 and is headquartered in Redwood City, California.
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