How to Invest in Video Game Companies | Corsair Gaming Stock Analysis [CRSR] | PE Ratio Explained
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So you want to invest in video game companies, but aren’t sure where to look? Well then you came to the right video!
Today I am going to talk about how you can invest in gaming companies as well as how we can use the price to earnings ratio in valuing a company.
Since this is month 2 of my investing series where I invest $150 per month I won’t make you watch the whole video to find out what it is. In this video I am adding $150 to my fidelity account and buying $150 worth of Corsair Gaming.
In return for not making you wait I’d really appreciate it if you subscribed to the channel and liked the video!
It really keeps me motivated when making videos and pursuing youtube.
Annnd clearly the market isn’t treating me very well either.
Let’s talk about the gaming industry and gaming stocks. I think there are a variety of ways that you can tackle investing in the video game industry whether that be through and industry ETF like the Van Eck Vectors Video Gaming and eSports ETF ticker symbol ESPO. I think this is a great option for those who want a more passive approach to investing.
On this channel I like to take an active approach of managing my portfolio by buying both individual stocks, diversified etfs, and also selling options.
While the Video game etf would be an ok option, I think there are better options out there in individual companies. Which brings me to corsair gaming.
Corsair Gaming is a consumer technology company that focuses their products around computer peripherals like mouse, keyboard, headsets, and prebuilt desktop computers.
Corsair also owns an audio and video equipment company called Elgato Gaming that makes high quality equipment for content creators in the video game and streaming space.
What I like about Corsair and elgato products is that they are of the highest quality in the gaming and streaming space. Most if not all of their products have extremely high reviews online and are frequents purchased in store. I even use a corsair gaming headset for my day job and I have recommended it to numerous colleagues.
On top of Corsair having a fantastic product suite and large opportunity to continue growing, I also find their company stock to be trading at a significant discount that I feel is unfair to the company.
Corsair is currently trading at price to earnings ratio of 27 and a forward price to earnings ratio of just 19! A steal if ive ever seen one! Corsair is expected to grow revenues by 39% this year 2021 and 30% in 2022. They are also expected to grow 37% annually over the next 5 years.
Another great valuation metric I like to look at is the price to sales ratio and corsair is trading at a modest 1.64 compared to other high flyer companies like tesla, square, or shopify all trading above 10 times that!
Even looking at the 6 month chart of corsair we’ve seen quite a kangaroo like environment with the price getting up to as high as $52 per share and now at a discount of right around $30 per share.
So I mentioned that I feel Corsair is undervalued given its P/E ratio and forward P/E ratio compared to other companies in the market.
So what exactly does that mean?
Well a price to earnings ratio is one of the most widely used metrics for investors and analysts to determine stock valuation. In addition to showing whether a company’s stock price is overvalued or undervalued, the P/E can reveal how a stock’s valuation compares to its industry group or a benchmark like the S&P 500 index.
The P/E shows what the market is willing to pay today for a stock based on its past or future earnings. A high P/E could mean that a stock’s price is high relative to earnings and possibly overvalued. Conversely, a low P/E might indicate that the current stock price is low relative to earnings.
For example the current S&P 500 PE ratio is a whopping 44, and its forward PE ratio is trading at 22.
Compare that to Corsairs 27 and forward 19 we can see that Corsair is trading at a discount to the S&P as well as maybe the more appropriate tech oriented index, the Nasdaq 100.
The P/E is calculated by dividing the share price by the earnings per shares, or when calculating forward PE, we use the estimated earnings over the next 12 months.
So with all of this being said, I find Corsair Gaming to be a perfect addition to my portfolio and I see it much more likely growing over the next 3–5 years from its current $3 billion dollar market cap to $10b-12b, and outperforming the market indexes overall.
And with that being said, the other day I picked up $150 of corsair stock in my public fidelity account and also in my larger taxable account I bought 400 shares which allows me to sell 4 covered calls and generate some extra income in my account.
If you enjoyed this video entertaining and my analysis of Corsair Gaming stock helpful, please consider subscribing to my channel! I plan on making more videos around options, individual stocks, and investing going forward and hopefully inspiring others to invest as well!
Thanks for watching! Subscribe to the channel, and I’ll see ya next time…. Peace!
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