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Nintendo (OTCPK:NTDOY), its fans and its shareholders are partying like it's 1990. That's right -- Nintendo is trading at its highest levels in over fifteen years.

I wrote before that I believe all video game industry stakeholders should thank Nintendo for helping grow the gaming market by spreading interest (making things fun while keeping it simple) beyond traditional gamers to include former gamers, women and the elderly.

I remember reading an article last year from a California daily that said even some handicap gamers were thankful for the wand-like controller, which would allow them to play again/play more easily.

That said, the key question -- all along as Nintendo's share price has climbed to the moon and been one of the top performers of the Nikkei -- has been how much more upside does Nintendo have? (Scroll down for earnings revision and P/E analysis.)

Less than two weeks ago I wrote about three analyst share price target hikes. Nintendo has already hit two of them at ¥33,000 and is making Nikko-Citi look smart at ¥36,000. Nintendo closed today in Japan at ¥33,000, trading as high as ¥33,050. This is definitely the highest it has been since 1990, of which the only data I have is that it traded as high as ¥34,300.

On an ADR and foreign currency adjusted basis at ¥121/$1, Nintendo's ¥33,000 close equals $34.09. It closed at $33.26 yesterday and the last bid/ask as of publishing was: $34.05 / $34.15. The ¥36,000 target equals $37.19, or about 9% of potential upside.

When I covered those analyst actions I mentioned Nintendo might be worth considering if it pulled back by 10% or more. At the time it was under some selling pressure but never lost more than about 8.5%. Since that time it has continued to surge higher and higher. I have honestly, but regretfully missed the Nintendo boat too many times.

With quarterly earnings coming out tomorrow I want to take a look at how the stock has been trading on a P/E and forward P/E basis and also look at its historical earnings revisions. All of the data I pulled (from Nintendo IR and Yahoo! Finance - Japan) pertains to full fiscal year guidance and earnings. I believe there are high expectations of yet another upward revision (see latest revision summary here) of full year earnings tomorrow for the year ending March 2007 (with the full year earnings to be announced some time in late May).

See the image below (click to enlarge) for earnings and revisions data going back to 2003. Nintendo's ordinary shares are currently trading at 35.2x expected FY'07 earnings and 43.3x trailing earnings. This sounds high and it is. However, I think the most important metric is considering Nintendo's forward P/E on a comparative basis, as Nintendo has upped its guidance this fiscal year by approximately 20% or more on three occassions, for a grand total 84.6% revision. In light of this, Nintendo is currently trading lower on a forward P/E basis than it has all fiscal year.

Nintendo-PE-Ratios-Revisions-01-24-07

What matters tomorrow is whether there will be another upward revision and by how much. Also, pay attention to comments on Wii and DS-related sales. Lastly, watch Nintendo's foreign currency (dollar and euro) forecasts. The yen is trading at a multi-year low against the dollar and at all-time lows against the euro.

In closing, consider that over the past two years Nintendo has beaten its own final full fiscal year earnings guidance by 3.5% and 6.6% respectively. Better-than-anticipated sales as more supply of Wii consoles becomes available and sustained weakness in the yen (assuming the BoJ doesn't hike in Q1) means it will likely beat its estimates again.

Nintendo (OTCPK:NTDOY) 1-year chart:

Nintendo-NTDOYPK-1yr-chart-01-23-07

Disclosure: The author does not own shares of Nintendo.

Source: A Look at Nintendo Ahead of Earnings