Giant Interactive Group Inc (ADR) (GA): Why Buying This Stock Makes Sense After Its Recent Dip

Moreover, Giant is also looking to expand into mobile, but it isn’t in a hurry to do so. The company is of the opinion that MMORPGs (massively multiplayer online role-playing game) offer better monetization prospects than mobile but it won’t be wise to leave that area untouched.

For instance, NetEase, Inc (ADR) (NASDAQ:NTES), which, like Giant, has been focusing on its MMO games to improve its top line has also forayed into mobile. It had 75 million installations of its mobile games at the end of the previous quarter and 29 million daily active users. To further improve its mobile prospects, NetEase, Inc (ADR) (NASDAQ:NTES) will launch more games for mobile this year.

Thus, even though Giant thinks otherwise, it wouldn’t be prudent to leave mobile untouched and thus, it has decided to test the waters with one mobile game this year.

Valuation and takeaway

Another enticing part about Giant, as I’d said earlier, is its valuation. The stock trades just 11 times trailing earnings and this comes down to 7.5 on a forward basis. Its PEG ratio is just 0.60, which gives investors another reason to buy the stock on the weakness that it has experienced of late.

The company has paid juicy annual dividends in the past, like it announced a dividend of $0.42 per share earlier this year, and has now decided to pay a semiannual dividend from this year. Moreover, Giant is a debt-free company and has $480 million in cash, which should help it in its expansion moves going forward.

Hence, there are some very good reasons why Giant is worth buying after its recent dip as the company’s long-term prospects are still intact, it’s not expensive, and pays a solid dividend as well.

Harsh Chauhan has no position in any stocks mentioned. The Motley Fool recommends Giant Interactive Group (NYSE:GA) and NetEase.com.

The article Why Buying This Stock Makes Sense After Its Recent Dip originally appeared on Fool.com and is written by Harsh Chauhan.

Harsh 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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