Value Investors: Forget Nintendo, Buy These 3 Stocks Instead

Value Investors: Forget Nintendo, Buy These 3 Stocks Instead

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Shares of Nintendo Co. Ltd. NTDOY have surged over 63% since the launch of the augmented reality-based game, Pokemon Go. The game has seen unprecedented success as initial survey reports suggest that it has already raked in $250 million in revenues.

But as they say all that glitters is not gold.  If we look closely, Nintendo hasn’t fared that well on the value front. The recent price increase and meteoric boost in market cap raise a lot of questions regarding the valuation of the company.

If we look at the numbers, the company has a PE ratio of 88.45%, which compares unfavorably with the industry standard of 28.4%. Moreover, in the last reported quarter, it delivered dismal results with both the top and the bottom lines missing the estimates by a wide margin. Yes, revenues from Pokemon were not included in this quarter’s financials but even then Nintendo would have got only a portion of the revenues. Further, questions regarding Pokémon’s sustainability are already cropping up.

Nintendo continues to see weakness in its core business especially as it struggles to solidify its presence in the mobile gaming space.

The company has a Value Grade of ‘F’ as per our latest style score system . Moreover Nintendo currently carries a Zacks Rank #5 (Strong Sell).

For value investors keen on the tech space, we have shortlisted a few stocks that appear to be good bets.

So How Do We Pick the Stocks?

Our Value Style Score highlights all valuation metrics and represents them as one score that warns investors against ‘value traps’ and helps them to find stocks that are actually trading cheap.

When the Zacks Rank indicates a “Strong Buy” or even a “Buy” (Zacks Rank #1 or #2), it reflects an upward trend in the stock’s earnings estimates.

Hence, stocks with a Value Style Score of ‘A’ or ‘B,’ when combined with a Zacks Rank #1 or #2, offer the best opportunities in the value investing space.

Here we have picked three stocks, each with a favorable Zacks Rank and a high value score. We have also considered their P/E ratio – an important factor for recognizing value stocks.

Our Picks

Changyou.com CYOU is a prominent online games developer in China.  The company has gained recognition for its offerings like Tian Long Ba Bu (TLBB) and Blade Online. Of late, Changyou has been stepping up its R&D efforts to develop more innovative and user friendly mobile games, leveraging its own huge PC games user base.

In the past, Changyou and Tencent struck a licensing deal for TLBB mobile games. The company said that it was betting big on Tencent’s distribution capabilities along with its research in hard core games to bring erstwhile PC game players to mobile.

Changyou sports a Zacks Rank #1 and has a Value Style Score of ‘A.’ The stock has a P/E ratio of 9.55%.

Plexus Corp. PLXS is one of the leading providers of electronic contract manufacturing services to original equipment manufacturers (OEMs). The company is expected to benefit from its new program wins especially in the Industrial/Commercial sector. Additionally, the consolidation of the company’s production facilities in low-cost areas is expected to boost margins.

Plexus carries a Zacks Rank #2 and a Value Style Score of ‘A.’ The stock has a P/E ratio of 17.39%.

j2 Global, Inc. JCOM is a leading provider of unified messaging capabilities. j2 Global offers outsourced, value-added messaging, and communications services to both businesses and individuals, supported by an array of global telephony/Internet Protocol (IP) networks. The company has been benefiting from the strength in its Cloud Service and Digital Media units. Another important factor is its growth through acquisition policy. j2 Global completed six acquisitions in the second quarter of 2016. 

j2 Global carries a Zacks Rank #2 and a Value Style Score of ‘B.’ The stock has a P/E ratio of 13.72%.

What are the best value stocks in the market today? One way to find them is with our Value Investor service. Each week we take a look at some hidden gems that have undiscovered profit potential for investors in addition to commentary about the state of the market. Click here to learn more about Value Investor >>>

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CHANGYOU.COM (CYOU): Free Stock Analysis Report

J2 GLOBAL INC (JCOM): Free Stock Analysis Report

NINTENDO LTD (NTDOY): Free Stock Analysis Report

PLEXUS CORP (PLXS): Free Stock Analysis Report

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