Over the past three months, one of the top growth leaders in the S&P 500 index has been the entertainment industry (+21.9%).
Some of the largest companies in this industry (by market capitalization): Electronic Arts ($43.0B) – one of the world’s largest third-party video game publishers, owns popular franchises, including Madden, EA Sports FC (formerly FIFA), Battlefield, Apex Legends, Mass Effect, Dragon’s Age and Need for Speed, as well as Take Two Interactive Software ($31.1B), a video game developer that includes 3 of its own labels: Rockstar Games, 2K and Zynga. Take-Two’s portfolio of franchises is headed by Grand Theft Auto, as well as other well-known games such as NBA 2K, Civilization, Borderlands, Bioshock, and Xcom.
Based on the latest quarterly reporting data, we analyzed each company’s profitability, strength, and efficiency criteria according to the methodology of Stanford University professor Joseph Piotroski.
As we can see, from the point of view of fundamental data assessment, Electronic Arts outperforms Take Two Interactive Software in terms of profitability and sustainability, and Take Two Interactive Software outperforms its competitor in terms of efficiency.
Over the past 3 months, shares of Electronic Arts have increased by +7.8%, and Take Two Interactive Software by +18.0% (the S&P 500 index has increased by +4.6%).Take Two Interactive Software has not only outperformed its closest competitor, but also demonstrated better results compared to the index.
So, the winner in this issue is Electronic Arts. Although W.W. Grainger is superior in terms of operating margin and its shares show better returns, Electronic Arts’ business outperforms its competitor in terms of return on assets, change in return on assets, operating cash flow, liquidity and financing.
* This is not an investment recommendation. It is up to each individual to decide which criteria to favor when making an investment decision, taking into account their goals and individual risk tolerance.
