Electronic Arts (NASDAQ:EA – Get Free Report) and GameStop (NYSE:GME – Get Free Report) are both consumer discretionary companies, but which is the better business? We will compare the two businesses based on the strength of their valuation, earnings, profitability, dividends, risk, institutional ownership and analyst recommendations.
Volatility and Risk
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.
Insider and Institutional Ownership
90.2% of Electronic Arts shares are held by institutional investors. Comparatively, 29.2% of GameStop shares are held by institutional investors. 0.2% of Electronic Arts shares are held by company insiders. Comparatively, 9.5% of GameStop shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.
Valuation and Earnings
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Electronic Arts | $7.53 billion | 6.73 | $887.00 million | $3.49 | 57.92 |
| GameStop | $3.73 billion | 2.58 | $418.40 million | $1.32 | 16.24 |
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.
Dividends
Electronic Arts pays an annual dividend of $0.76 per share and has a dividend yield of 0.4%. GameStop pays an annual dividend of $1.52 per share and has a dividend yield of 7.1%. Electronic Arts pays out 21.8% of its earnings in the form of a dividend. GameStop pays out 115.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
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% |
Analyst Recommendations
This is a breakdown of recent ratings 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 2.72%. Given Electronic Arts’ stronger consensus rating and higher possible upside, equities analysts plainly believe Electronic Arts is more favorable than GameStop.
Summary
Electronic Arts beats GameStop on 12 of the 16 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.
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