Electronic Arts Inc.'s (NASDAQ:EA) Stock Is Going Strong: Have Financials A Role To Play?

Simply Wall St.11-20

Electronic Arts (NASDAQ:EA) has had a great run on the share market with its stock up by a significant 14% over the last month. As most would know, fundamentals are what usually guide market price ...

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As most would know, fundamentals are what usually guide market price ...</p>\n\n<a href=\"https://finance.yahoo.com/news/electronic-arts-inc-nasdaq-ea-110023372.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4585","symbol_name":"ETF&股票定投概念","start_time":0,"source_url":"https://finance.yahoo.com/news/electronic-arts-inc-nasdaq-ea-110023372.html","article_id":"2484086199","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/Amk7mg_G6jdvcc9Hdcrpkw--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/2ffe8b4e83f75106b1698b8e5f2129fc"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2484086199","pubTimestamp":1732100423,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"Electronic Arts  has had a great run on the share market with its stock up by a significant 14% over the last month. As most would know, fundamentals are what usually guide market price movements over the long-term, so we decided to look at the company's key financial indicators today to determine if they have any role to play in the recent price movement. Specifically, we decided to study Electronic Arts'  ROE in this article.ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. This then helps them determine if the stock is placed for a bright or bleak future. Has the market pr","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4585":"ETF&股票定投概念","QLD":"纳指两倍做多ETF","BK4533":"AQR资本管理(全球第二大对冲基金)","TQQQ":"纳指三倍做多ETF","SQQQ":"纳指三倍做空ETF","LU1585245621.USD":"EASTSPRING INV GLOBAL LOW VOLATILITY EQUITY FUND \"A\" (USD) ACC B","BK4577":"网络游戏","LU2247934214.USD":"FIDELITY FUNDS SUSTAINABLE FUTURE CONNECTIVITY \"A\" (USD) ACC","BK4588":"碎股","NDAQ":"纳斯达克OMX交易所","QID":"纳指两倍做空ETF","LU2095319765.USD":"Natixis Thematics Subscription Economy R/A USD","BK4085":"互动家庭娱乐",".IXIC":"NASDAQ Composite","LU2210150020.SGD":"Natixis Thematics Subscription Economy R/A SGD","EA":"艺电","LU2210149790.SGD":"Natixis Thematics Subscription Economy R/A SGD-H","BK4112":"金融交易所和数据","IE00BKPKM429.USD":"NEUBERGER BERMAN GLOBAL SUSTAINABLE EQUITY \"A\" (USD) ACC","IE00BGHQF748.EUR":"GUINNESS GLOBAL MONEY MANAGERS \"C\" (EUR) ACC","IE00B64PRP62.GBP":"GUINNESS GLOBAL MONEY MANAGERS \"C\" (GBP) ACC","LU1430594728.SGD":"Eastspring Investments - Global Low Volatility Equity AS SGD","IE00B3QW5Z07.USD":"GUINNESS GLOBAL MONEY MANAGERS \"C\" (USD) ACC","BK4532":"文艺复兴科技持仓","PSQ":"纳指反向ETF"},"translate_title":"艺电公司（纳斯达克：EA）的股票走强：金融股可以发挥作用吗？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"NDAQ":1,"EA":1,".IXIC":1,"TQQQ":0.6,"SQQQ":0.6,"QLD":0.6,"QID":0.6,"PSQ":0.6,"NQmain":0.6,"MNQmain":0.6},"content_text":"Electronic Arts (NASDAQ:EA) has had a great run on the share market with its stock up by a significant 14% over the last month. As most would know, fundamentals are what usually guide market price movements over the long-term, so we decided to look at the company's key financial indicators today to determine if they have any role to play in the recent price movement. Specifically, we decided to study Electronic Arts'  ROE in this article. \n ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders. \n Check out our latest analysis for Electronic Arts \n How To Calculate Return On Equity? \n ROE can be calculated by using the formula: \n Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity \nSo, based on the above formula, the ROE for Electronic Arts is:\n14% = US$1.0b ÷ US$7.4b (Based on the trailing twelve months to September 2024).\n The 'return' is the profit over the last twelve months. So, this means that for every $1 of its shareholder's investments, the company generates a profit of $0.14. \n What Is The Relationship Between ROE And Earnings Growth? \n Thus far, we have learned that ROE measures how efficiently a company is generating its profits. Depending on how much of these profits the company reinvests or \"retains\", and how effectively it does so, we are then able to assess a company’s earnings growth potential. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics. \n Electronic Arts' Earnings Growth And 14% ROE \n At first glance, Electronic Arts seems to have a decent ROE. And on comparing with the industry, we found that the the average industry ROE is similar at 14%. As you might expect, the 22% net income decline reported by Electronic Arts is a bit of a surprise. We reckon that there could be some other factors at play here that are preventing the company's growth. These include low earnings retention or poor allocation of capital. \n So, as a next step, we compared Electronic Arts' performance against the industry and were disappointed to discover that while the company has been shrinking its earnings, the industry has been growing its earnings at a rate of 25% over the last few years. \n\n\n\n  NasdaqGS:EA Past Earnings Growth November 20th 2024\n \n\n Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. This then helps them determine if the stock is placed for a bright or bleak future. Has the market priced in the future outlook for EA? You can find out in our latest intrinsic value infographic research report.  \n Is Electronic Arts Efficiently Re-investing Its Profits? \n When we piece together Electronic Arts' low three-year median payout ratio of 22% (where it is retaining 78% of its profits), calculated for the last three-year period, we are puzzled by the lack of growth. This typically shouldn't be the case when a company is retaining most of its earnings. So there could be some other explanations in that regard. For example, the company's business may be deteriorating. \n Moreover, Electronic Arts has been paying dividends for four years, which is a considerable amount of time, suggesting that management must have perceived that the shareholders prefer consistent dividends even though earnings have been shrinking. Existing analyst estimates suggest that the company's future payout ratio is expected to drop to 8.8% over the next three years. Accordingly, the expected drop in the payout ratio explains the expected increase in the company's ROE to 25%, over the same period. \n Conclusion \n In total, it does look like Electronic Arts has some positive aspects to its business. Yet, the low earnings growth is a bit concerning, especially given that the company has a high rate of return and is reinvesting ma huge portion of its profits. By the looks of it, there could be some other factors, not necessarily in control of the business, that's preventing growth. Having said that, looking at current analyst estimates, we found that the company's earnings growth rate is expected to see a huge improvement. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company. \nHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2484086199"}