GameStop Corp. (GME) Stock Analysis
GameStop Corp. (GME) Stock Analysis
Overall Grade: F (Concerning)
View interactive company profile →
GameStop Corp. faces challenges in financial performance that warrant careful analysis.
Key Metrics:
| Metric | Value | Context |
|---|---|---|
| ROIC | 2.4% | Below expectations |
| FCF Margin | 14.9% | Healthy cash flow |
| Debt/Equity | 0.8x | Moderate leverage |
Investment Thesis: Healthy free cash flow margin of 14.9% provides financial flexibility for growth and shareholder returns.
What is GameStop Corp.'s Profitability and ROIC?
GameStop Corp.'s return on invested capital of 2.4% is below the typical cost of capital. Gross margin of 30.8% with operating margin at 4.6% reflects the company's moderate market position.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 2.4% | Red flag | Below cost of capital |
| Return on Equity (ROE) | 8.4% | Adequate | Moderate equity returns |
| Gross Margin | 30.8% | Good | Competitive pricing environment |
| Operating Margin | 4.6% | Warning | Moderate operational efficiency |
How Strong is GameStop Corp.'s Cash Flow Quality?
GameStop Corp. generated $568.7M in free cash flow over the trailing twelve months, representing a 14.9% margin. Cash earnings quality is strong, with operating cash flow exceeding net income by 1.4x.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Free Cash Flow Margin | 14.9% | Good | Healthy cash generation |
| Free Cash Flow (TTM) | $568.7M | Good | Positive cash generation |
| OCF/Net Income | 1.4x | Excellent | High earnings quality |
| FCF Consistency (8Q) | N/A | Warning | Variable cash flow |
What is GameStop Corp.'s Financial Health?
GameStop Corp. maintains a net cash position of $4.7B, providing significant financial flexibility.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Debt to Equity | 0.8x | Adequate | Moderate leverage |
| Net Cash Position | $4.7B | Excellent | Net cash positive |
Is GameStop Corp. Stock Overvalued or Undervalued?
GameStop Corp. trades at a P/E of 22.7x, representing a premium to the sector median of N/A. Free cash flow yield of 5.7% offers attractive cash returns.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| P/E Ratio | 22.7x | Adequate | Premium valuation |
| EV/Sales | 1.7x | Excellent | Attractive revenue multiple |
| FCF Yield | 5.7% | Good | Attractive cash return |
Sector Rankings
| Metric | Value | Percentile | vs Median |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 2.4% | Bottom 25% | 0.2x below |
| Free Cash Flow Margin | 14.9% | Top 5% | 4.7x above |
| Gross Margin | 30.8% | Bottom 50% | 0.8x below |
| Operating Margin | 4.6% | Bottom 50% | 0.9x below |
| Return on Equity (ROE) | 8.4% | Bottom 50% | 0.7x below |
| P/E Ratio | 22.7x | N/A | - |
Rating Thresholds
Return on Invested Capital (ROIC)
Measures how efficiently a company uses its debt and equity capital to generate profits. ROIC above 15% typically indicates a competitive moat.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Exceptional capital efficiency, strong competitive moat |
| Good | 12% - 20% | Above-average returns, sustainable competitive position |
| Adequate | 8% - 12% | Around cost of capital, moderate competitive position |
| Warning | 4% - 8% | Below cost of capital, value may be eroding |
| Red flag | < 4% | Significant capital destruction, fundamental issues |
Current: 2.4% (Red flag - Bottom 25% of sector (median: 9.8%))
Free Cash Flow Margin
The percentage of revenue converted to free cash flow. Higher margins indicate stronger cash generation and business quality.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Strong cash generation, high-quality business |
| Good | 10% - 20% | Healthy cash conversion |
| Adequate | 5% - 10% | Moderate cash generation |
| Warning | 0% - 5% | Thin cash margins, capital intensive |
| Red flag | < 0% | Cash burn, potential liquidity concerns |
Current: 14.9% (Good - Top 5% of sector (median: 3.2%))
Gross Margin
Revenue minus cost of goods sold as a percentage. Higher gross margins indicate pricing power and competitive advantage.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 50% | Strong pricing power and competitive moat |
| Good | 30% - 50% | Healthy margins, differentiated product |
| Adequate | 20% - 30% | Moderate margins, competitive industry |
| Warning | 10% - 20% | Thin margins, commodity-like business |
| Red flag | < 10% | Very thin margins, structural challenges |
Current: 30.8% (Good - Bottom 50% of sector (median: 40.9%))
Debt to Equity Ratio
Total debt divided by shareholders' equity. Lower ratios indicate more conservative financing and reduced financial risk.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 0.3x | Conservative leverage, strong balance sheet |
| Good | 0.3x - 0.7x | Moderate leverage, healthy financial position |
| Adequate | 0.7x - 1.5x | Elevated leverage, monitor closely |
| Warning | 1.5x - 3.0x | High leverage, increased financial risk |
| Red flag | > 3.0x | Excessive leverage, potential distress risk |
Current: 78.5% (Adequate)
P/E Ratio (Price-to-Earnings)
Stock price divided by earnings per share. Lower P/E may indicate undervaluation, while higher P/E suggests growth expectations.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 15x | Attractively valued, potential opportunity |
| Good | 15x - 25x | Fair value for quality company |
| Adequate | 25x - 35x | Growth premium, justify with earnings growth |
| Warning | 35x - 50x | High expectations priced in |
| Red flag | > 50x or negative | Speculative valuation or losses |
Current: 22.7x (Adequate)
Free Cash Flow Yield
Free cash flow per share divided by stock price. Higher FCF yield indicates better cash return relative to valuation.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 8% | High cash return, potential value opportunity |
| Good | 5% - 8% | Solid cash yield |
| Adequate | 3% - 5% | Moderate cash return |
| Warning | 1% - 3% | Low cash yield, growth expectations |
| Red flag | < 1% | Minimal cash return to shareholders |
Current: 5.7% (Good)
Frequently Asked Questions
Q: What is GameStop Corp.'s Return on Invested Capital (ROIC)?
GameStop Corp. (GME) has a trailing twelve-month Return on Invested Capital (ROIC) of 2.4%. This compares below the sector median of 9.8%. An ROIC below 8% suggests the company may be destroying shareholder value.
Q: What is GameStop Corp.'s Free Cash Flow Margin?
GameStop Corp. (GME) has a free cash flow margin of 14.9%, generating $568.7 million in free cash flow over the trailing twelve months. A FCF margin between 10-20% represents healthy cash generation for most industries.
Q: Is GameStop Corp. stock overvalued or undervalued?
GameStop Corp. (GME) trades at a P/E ratio of 22.7x, which is above the sector median of N/A. The EV/Sales multiple is 1.7x. Free cash flow yield is 5.7%, which is in line with market averages.
Q: How much debt does GameStop Corp. have?
GameStop Corp. (GME) has a debt-to-equity ratio of 0.8x with total debt of $4.2 billion. Despite carrying debt, the company maintains a net cash position of $4.7 billion.
Q: What is GameStop Corp.'s revenue and earnings growth?
GameStop Corp. (GME) declined revenue by 12.1% year-over-year. Earnings per share increased by 405.9% compared to the prior year. Revenue decline may indicate market challenges or industry headwinds.
Q: How does GameStop Corp. compare to competitors in Consumer Discretionary?
Compared to other companies in Consumer Discretionary, GameStop Corp. (GME) shows: ROIC of 2.4% is below the sector median of 9.8% (Bottom 20%). FCF margin of 14.9% exceeds the sector median of 3.2% (Top 0% of sector). Gross margin at 30.8% is 10.1 percentage points lower than sector peers. These rankings are based on MetricDuck's analysis of all Consumer Discretionary companies with available SEC filings.
Q: What warning signs should I watch for with GameStop Corp.?
GameStop Corp. (GME) shows no major financial warning signs based on current metrics. However, investors should always monitor: 1) Margin compression trends, 2) Cash flow consistency, 3) Debt levels relative to cash generation, and 4) Changes in competitive positioning.
Data Source: Data sourced from 10-Q filed 2025-12-09. TTM metrics as of Q4 2025.
Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.
This analysis is for informational purposes only and does not constitute investment advice.