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Is Electronic Arts Inc. (EA) Stock Trading Below Fair Value?

Tuesday, May 03, 2022 12:45 PM | InvestorsObserver Analysts
Is Electronic Arts Inc. (EA) Stock Trading Below Fair Value?

Electronic Arts Inc. (EA) receives a strong valuation ranking of 66 from InvestorsObserver data analysis. The proprietary ranking system focuses on the underlying health of a company through analysis of its stock price, earnings, and growth rate. EA has a better value than 66% of stocks based on these valuation analytics. Investors primarily focused on buy-and-hold strategies will find the valuation ranking relevant to their goals when making investment decisions.

Valuation Rank - 66
EA gets a 66 Valuation Rank today. Find out what this means to you and get the rest of the rankings on EA!

Metrics Analysis

EA has a trailing twelve month Price to Earnings (PE) ratio of 54.1. The historical average of roughly 15 shows a poor value for EA stock as investors are paying higher share prices relative to the company's earnings. EA's high trailing PE ratio shows that the firm has been trading above its fair market value recently. Its trailing 12-month earnings per share (EPS) of 2.22 does not justify the stock's current price. However, trailing PE ratios do not factor in the company's projected growth rate, resulting in many newer firms having high PE ratios due to high growth potential enticing investors despite inadequate earnings.
EA currently has a 12-month-forward-PE-to-Growth (PEG) ratio of 1.59. The market is currently overvaluing EA in relation to its projected growth due to the PEG ratio being above the fair market value of 1. EA's PEG comes from its forward price to earnings ratio being divided by its growth rate. Because PEG ratios include more fundamentals of a company's overall health with additional focus on the future, they are one of the most used valuation metrics by analysts.

Summary

EA' has a weak valuation at its current share price on account of a overvalued PEG ratio despite strong growth. EA's PE and PEG are worse than the market average leading to a below average valuation score. Click Here to get the full Report on Electronic Arts Inc. (EA) stock.

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