Stock Analysis on Net

GameStop Corp. (NYSE:GME)

This company has been moved to the archive! The financial data has not been updated since June 1, 2022.

Present Value of Free Cash Flow to Equity (FCFE)

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In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.


Intrinsic Stock Value (Valuation Summary)

GameStop Corp., free cash flow to equity (FCFE) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at -9.98%
01 FCFE0 -828,700
1 FCFE1 = -828,700 × (1 + 0.00%)
2 FCFE2 = × (1 + 0.00%)
3 FCFE3 = × (1 + 0.00%)
4 FCFE4 = × (1 + 0.00%)
5 FCFE5 = × (1 + 0.00%)
5 Terminal value (TV5) = × (1 + 0.00%) ÷ (-9.98%0.00%)
Intrinsic value of GameStop Corp. common stock
 
Intrinsic value of GameStop Corp. common stock (per share) $—
Current share price $30.35

Based on: 10-K (reporting date: 2022-01-29).

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.43%
Expected rate of return on market portfolio2 E(RM) 13.60%
Systematic risk of GameStop Corp. common stock βGME -1.57
 
Required rate of return on GameStop Corp. common stock3 rGME -9.98%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rGME = RF + βGME [E(RM) – RF]
= 4.43% + -1.57 [13.60%4.43%]
= -9.98%


FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

GameStop Corp., PRAT model

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Average Jan 29, 2022 Jan 30, 2021 Feb 1, 2020 Feb 2, 2019 Feb 3, 2018 Jan 28, 2017
Selected Financial Data (US$ in thousands)
Dividends declared 38,500 155,900 155,900 155,100
Net income (loss) (381,300) (215,300) (470,900) (673,000) 34,700 353,200
Net sales 6,010,700 5,089,800 6,466,000 8,285,300 9,224,600 8,607,900
Total assets 3,499,300 2,472,600 2,819,700 4,044,300 5,041,600 4,975,900
Stockholders’ equity 1,602,500 436,700 611,500 1,336,200 2,214,500 2,254,100
Financial Ratios
Retention rate1 -3.49 0.56
Profit margin2 -6.34% -4.23% -7.28% -8.12% 0.38% 4.10%
Asset turnover3 1.72 2.06 2.29 2.05 1.83 1.73
Financial leverage4 2.18 5.66 4.61 3.03 2.28 2.21
Averages
Retention rate -1.47
Profit margin -3.58%
Asset turnover 1.95
Financial leverage 3.33
 
FCFE growth rate (g)5 0.00%

Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

2022 Calculations

1 Retention rate = (Net income (loss) – Dividends declared) ÷ Net income (loss)
= (-381,3000) ÷ -381,300
=

2 Profit margin = 100 × Net income (loss) ÷ Net sales
= 100 × -381,300 ÷ 6,010,700
= -6.34%

3 Asset turnover = Net sales ÷ Total assets
= 6,010,700 ÷ 3,499,300
= 1.72

4 Financial leverage = Total assets ÷ Stockholders’ equity
= 3,499,300 ÷ 1,602,500
= 2.18

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= -1.47 × -3.58% × 1.95 × 3.33
= 0.00%


FCFE growth rate (g) forecast

GameStop Corp., H-model

Microsoft Excel
Year Value gt
1 g1 0.00%
2 g2 0.00%
3 g3 0.00%
4 g4 0.00%
5 and thereafter g5 0.00%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 0.00% + (0.00%0.00%) × (2 – 1) ÷ (5 – 1)
= 0.00%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 0.00% + (0.00%0.00%) × (3 – 1) ÷ (5 – 1)
= 0.00%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 0.00% + (0.00%0.00%) × (4 – 1) ÷ (5 – 1)
= 0.00%