Activision Blizzard, Inc. (ATVI) – Call of Duty, Warcraft, Starcraft: What’s Not to Love About This Company?

Activision also has made significant strides in developing intellectual property which appeals to the consumer. It has started to penetrate the developing markets and already has a strong network in both Asia and Latin America. The company’s management seems to have secured the future of Activision as its operating leverage and net income looks set to continue to grow rapidly over the next few years, providing increased return to shareholders.

The numbers clearly speak for themselves for Activision Blizzard, Inc. (NASDAQ:ATVI). It is miles ahead of its competition in terms of successfully generating profit out of its games while appealing to a wide audience. However, it is also important to put these numbers in perspective. A quick comparative analysis allows us to measure the financial performance of Activision versus its main competitors.

To find the enterprise value, we add the market cap of ~$16.05 billion to the total debt of $0 and then subtract the cash & cash equivalents of $4.6 billion. Therefore, Activision’s EV (enterprise value) is ~$11.4 billion. It reported EBITDA TTM of $1.7 billion, therefore, it has a trailing EV/EBITDA of 6.7x.

Perhaps, the best comparison is with Electronic Arts Inc. (NASDAQ:EA), as Electronic Arts is a firm that competes with both the Activision aspect of the company and the Blizzard part (Vivendi Games’ side). Activision Blizzard is clearly undervalued compared to Electronic Arts. With the exception of EA, its competitors are unprofitable and seem unable to present a threat to Activision. Therefore, with strong cash flow and a solid gamer base, Activision Blizzard, Inc. (NASDAQ:ATVI) seems well positioned to grow and gain market share.

The article Call of Duty, Warcraft, Starcraft: What’s Not to Love About This Company? originally appeared on Fool.com and is written by Rupert Nicholson.

Rupert Nicholson owns shares of Activision Blizzard. The Motley Fool recommends Activision Blizzard. The Motley Fool owns shares of Activision Blizzard. Rupert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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