Capcom: Growth Decelerates While Valuation Climbs To New Highs

(13min)

Summary

  • Capcom's stock soared 255% in five years, driven by blockbuster releases and stellar financials, but growth is now decelerating.
  • Despite record results and strong franchises, the current EV/EBIT of 28.15x bakes in very high expectations for future growth.
  • Management is investing in talent, new facilities, and strategic M&A to sustain growth, but gaming's cyclical nature poses risks.
  • I rate Capcom as Hold; it's a great business, but the valuation is too high at the moment.

Capcom U.S. Headquarters

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Capcom's (OTCPK:CCOEY) (OTCPK:CCOEF) stock has skyrocketed 255.4%, or 51% annually, over the past five years (already adjusted for the yen's devaluation), while revenue grew at a CAGR of 21.57% and operating income at an even more impressive CAGR of 44.31%.

This article was written by

I am a dedicated self-learner and long-term value investor focused on identifying undervalued companies in attractive sectors. As a long-term value investor, I look for companies that will withstand the test of time, so my investment strategy naturally centers on finding undervalued companies with decent ROIC, a net cash position, and strong brand equity.

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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