How’s it been doing?

It’s doing very well. Revenue moved 19% higher over the 12 months to the end of May, supported by many/most of us being confined to our homes. The £90.7m logged was a record for the company. A maiden contribution from Frontier Foundry — its label for third-party publishing — was another positive. 

All told, earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 21% to £38.1m, lending great support for Frontier’s ‘launch and nurture’ strategy. This is where it releases a game and then updates it over time; the idea being that a player will become increasingly invested in a game and continue playing the title for years to come. To date, FDEV has four such franchises: Elite Dangerous, Planet Coaster, Jurassic World Evolution and Planet Zoo.

Can all this continue?

This growth stock’s next game — Jurassic World Evolution 2 — is due for release in early November in time for Christmas. Frontier Foundry will also release three titles in the current financial year (Lemnis Gate, FAR: Changing Tides and Warhammer 40,000: Chaos Gate — Daemonhunters). As a result, the mid-cap thinks revenue will come in somewhere between £130m to £150m. That’s a huge jump on today’s already great numbers.

It potentially gets even better the following year. In FY23, between £160m and £180m is expected thanks to contributions from its hotly-anticipated first Formula 1 management game and its Warhammer Age of Sigmar IP real-time strategy title. The latter is licenced from market darling and FTSE 250 constituent Games Workshop.

So, what are the risks?

One potential issue is that more casual gamers will want to do other things with their time post-pandemic. In this way, Frontier is no different from other lockdown winners such as Bloomsbury Publishing and musical instrument seller Gear4music. This is inevitable to some degree but its impact should not be discounted.

Another potential drawback is that earnings at any developer can fluctuate from year to year. This is usually due to the irregular release of games. Even if release dates were consistent, there’s a chance that a particular game won’t be popular. Moreover, a competitor could release something that generates higher interest. In this way, gaming is no different from the music or movie industries.

Even nailed-on winners can suffer teething issues. Frontier experienced this itself in the last year following the release of a bug-laden Elite Dangerous: Odyssey. Although things now seem to be fixed, the episode certainly did its reputation with gamers no favours. It might also explain why this growth stock has been quite volatile in recent months.

Considering these potential headwinds, Frontier’s forward P/E of 38 feels punchy, to say the least. Then again, I wouldn’t be surprised if a deep-pocketed suitor submitted a generous bid for the whole company at some point anyway. That’s exactly what happened to one of FDEV’s highly-rated peers earlier this year.

Cash rich

Potential obstacles aside, I remain positive about this UK growth stock. Backed with over £42m in net cash on the balance sheet, I reckon this is a cautious buy for my own portfolio. 

The post 1 UK growth stock I’d buy following today’s record results! appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Frontier Developments. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The video game industry is seeing a very predictable boom in recent times. The pandemic-fuelled boom has pushed gaming stock to new heights. A recent report by Accenture valued the gaming sector in excess of $300bn. In the wake of this surge, some UK gaming companies are shining through.

Frontier Developments (LSE: FDEV) is one UK gaming stock I am looking to add to my long-term portfolio to capitalise on the industry boom. Here is why I’m expecting huge returns from the game developer over the next decade.

Financials

Frontier Developments shares have risen 18.7% in the last month and 29.3% in the last 12 months. Despite some turbulence in the last year, I expect steady growth for the foreseeable future.

Total revenue in 2020 was £76.1m (2019: £89.7m). This is because the company has been gearing up for big-name releases in 2022. Most 2020-21 releases have been updates for existing games.

The company has maintained an operating profit margin of 22% despite the lower revenue. Also, cash balances have increased to £45.8m in 2020 (2019: £35.3m). To me, this shows how the company is well placed to undertake R&D tasks and work on conceptualisation and development of new releases.

This brings me to the host of big-name releases Frontier has planned for 2022. The developer has secured the license to release Formula 1 management games from 2022 onwards. This is a huge gaming genre and could prove very profitable. Real-time strategy game Warhammer: Age of Sigmar also looks very promising as it allows for in-game purchases and paid future content.

The company is targeting five to six releases per year from 2023 onwards, propelled by the success of third-party publishing label, Frontier Foundry. The company expects revenue in 2023 to be £160m to £180m which is twice the current revenue figures. This leads me to believe that the UK gaming stock is set for a surge in the next five years.

Attractive business model

One important factor I look for in the financial data of gaming companies is how they generate their revenue. The gaming industry is built on recurring, in-game transactions and paid downloadable content (PDLCs). This strategy helps games remain popular and profitable for several years after the initial release. 

Older releases like Elite Dangerous, Planet Coaster, and Jurassic World Evolution generated 60% of the revenue in 2020 which is evidence that the Frontier’s launch and nurture strategy is the right way forward for the company.

Concerns

Though I am very optimistic about the growth of the gaming industry, picking a winner among the many studios is no easy task. Frontier’s financials and business model look strong but success depends on the trajectory of the gaming industry as a whole, which is ever-changing. 

Morphing audience opinions determine demand and success in the industry. Gaming enthusiasts have seen several promising releases buried because of one bad review or the launch of other popular titles.

In my opinion, Frontier Developments is a defensive game developer. They opt to generate revenue through intelligent licensing and PDLCs. Revenue from this could drive experimentation in the future too. The company is on my list of shares I would hold for a decade and I remain confident that this UK gaming stock could generate incredible shareholder returns.

The post This gaming stock is up 18% in 1 month. Should I buy now? appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Frontier Developments. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

One example of this is the video games industry. While multiple lockdowns have proved a huge tailwind for games developers, the medium-to-long term outlook for this part of the market also looks very rosy indeed. 

Picks and shovels play

Video games services provider Keywords Studios (LSE: KWS) is one way of playing this trend. Just a minnow a few years ago, the Dublin-based business is now a multi-billion pound company. Clients include top dogs such as Nintendo and Microsoft.

Based on today’s trading update, I see no reason why this growth story is about to end. Keywords expects to report revenues of roughly €238m for the first six months of 2021. This would be a 37% increase on the same period last year, demonstrating that the company has bounced back well from the disruption caused by Covid-19. A “buoyant video games market” also saw adjusted pre-tax profit jump 80% to around €40m.

As you’d expect, shares command a high price. A P/E of 46 for FY21 looks punchy considering some parts of its business “continue to experience some COVID-19 related operational constraints.” Margins look set to be squeezed too as costs return following the lifting of restrictions. 

Investors may also be concerned by the departure of CEO Andrew Day. While not rudderless (joint interim CEOs are in place), the loss of someone who oversaw such dramatic growth is a blow.

Nevertheless, I think the rising trend for developers to outsource work to companies like Keywords, coupled with its acquisitive strategy, should help support growth going forward. As far as the latter’s concerned, the AIM-listed stock isn’t short of cash either. Keywords had €84m in its coffers at the end of the trading period. 

Another top growth stock

Of course, Keywords isn’t the only way of playing the rise and rise of video gaming. Publisher Team17 (LSE: TM17) is another growth stock I’ve been bullish on for some time. Its shares are up almost 260% since listing on AIM back in May 2018. 

Also reporting to the market today, TM17 said trading to June had been in line with management expectations. Having snapped up app developer StoryToys last month, the company said it entered the second half of 2021 “in great shape.“

Once again however, shares are pricey (44 times earnings). Such a valuation could come back to bite if the global economic recovery slows. In fact, I’d say Team17 was a more risky proposition than Keywords since the latter’s multiple clients arguably mean its earnings are better diversified.

Then again, I wonder if the TM17’s interest in educational titles sets it apart from the competition. Following on from last month’s news on Sumo Group, I also wouldn’t be surprised if the firm was in the sights of a deep-pocketed suitor.

Cautious buys

Whether it’s buying a picks and shovels play like Keywords, a publisher like Team 17, or a passive fund tracking the industry, I think it’s hard to ignore gaming as an investment theme. While undeniably pricey, I reckon these growth stocks could still be cautious buys at this level.

The post 2 UK growth stocks to buy now appeared first on The Twelfth Magpie.

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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Microsoft. The Motley Fool UK has recommended Keywords Studios. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The bull case for the GameStop (GME) share price

2020 has been a challenging time for most retailers. After all, lockdown restrictions made footfall in physical stores drop significantly. But GameStop has been struggling for many years due to the rising popularity of downloading digital copies of video games instead of buying a physical disk. This transition by gamers effectively made the company an unnecessary middleman, which saw its revenues slashed and earnings drop into the red.  

But is that about to change? Following the recent events, activist investor Ryan Cohen bought a 13% stake in the business and will become chairman of the board in June. He previously co-founded the online pet food business Chewy and intends to use his knowledge to transform GameStop into a “digital-first, omnichannel retailer”. Beyond this, the firm has also replaced its CEO and CFO, resulting in a brand new management team.

This move towards higher-margin e-commerce appears to have given investors hope for the future potential of this business. And if successful, could enable the business to make a comeback. It’s also worth noting that the new management team recently signed a partnership with Microsoft. While there is limited information about this deal, it does include a royalty-like structure in which GameStop will receive a cut for each Xbox game sold on its website. But as promising as this may be, I remain quite sceptical about the GME share price.

Troubling financials

Whether new management can achieve its goals remains to be seen. As it stands, there’s limited information available on what a digital-first GameStop will look like as no guidance has been issued.

Looking at its recent financial statements, there appear to be some misleading signs of recovery that may be inflating the GME share price. While revenues declined by a further 22%, net losses were almost halved from $400m in 2019 to $238m in 2020. The lack of advertising, receiving, and distribution costs last year due to the pandemic substantially reduced the costs of sales. And this led to a seemingly improved bottom line. But looking at the gross profit margin, the firm’s profitability actually declined from 29.5% in 2019 to 24.7%.

On the balance sheet, long-term debt was reduced from $420m to $216m. This is an encouraging sign for me. Yet the money didn’t come from sustainable sources such as operating profits, but rather from closing and selling 462 stores.

The bottom line

To keep the lights on, the management team turned to shareholders to raise additional capital. And in April this year, it successfully issued 3.5m additional shares, raising $551m.

These new funds certainly give the business some breathing space. But, the online transformation of GameStop has only just started. And beyond the brand’s nostalgia factor, I can’t identify any discernible competitive advantages this business has in the online space.

As far as I can tell, the valuation of the GME share price is being driven entirely from speculation rather than fundamentals. I’m not interested in adding it to my portfolio.

The post Is the GameStop (GME) share price a ticking-time bomb? appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in GameStop. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Notwithstanding this, I’m not as confident as some that the share price will continue to soar from here, at least in the near future.

Now, don’t get me wrong. Roblox’s chief pull — allowing players to create avatars that can move between games, all of which have been built by members of its own community — is attractive. When players can switch from creating a theme park to racing a car to starring in a fashion show, it’s perhaps no surprise Roblox is one of the biggest-grossing apps on Apple and Google devices.

Should this be the case, I think there’s a better way to play the gaming theme. 

Top UK growth stock 

Today’s full-year results from Dublin-based gaming services provider Keywords Studios (LSE: KWS) were as good as you might expect. Despite Covid-19 forcing many of the company’s employees to work from home, group revenue increased 14.4% to €373.5m. Pre-tax profit rose a whopping 86.6% to €32.5m. On top of this, Keywords ended the year with net cash (€102.9m), thanks in part to a successful €110m placing conducted in May.

The outlook for earnings looks just as good. As a result of new console launches (Playstation 5 and Xbox X/S Series), Keywords expects to see increased demand across its service lines “in 2021 and beyond.” Indeed, joint interim CEO Jon Hauck said the company was “very confident” in its future, thanks to “the continued trend towards outsourcing and an increased focus on content creation in a growing video games market.”

Buyer beware

All this surely bodes well for the KWS share price over the medium-to-long term. This isn’t to say there won’t be some volatility along the way. Although up more than 1,000% over the last five years, the KWS share price has suffered some not-insignificant reversals over this period. 

Like Roblox, there’s also the possibility that demand for the shares may moderate as investors grow wary that even the most committed gamers will want to get outside more over the next few months. These things matter when it’s considered that KWS shares already traded on a heady 38 times forecast earnings before markets opened this morning. 

Even so, I’d definitely feel more comfortable backing Keywords over Roblox. Aside from making real profits, the former is less focused on fickle young gamers. The ‘picks and shovels’ nature of its business also gives Keywords some earnings diversification that Roblox arguably doesn’t have. 

That said, I’m happy to continue funneling my money into this gaming-focused fund instead.

The post I’d buy this UK growth share ahead of Roblox appeared first on The Twelfth Magpie.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Alphabet (C shares) and Apple. The Motley Fool UK has recommended Keywords Studios and recommends the following options: short March 2023 $130 calls on Apple and long March 2023 $120 calls on Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

That’s quite an impressive level of growth for only 24 hours of trading, in my opinion, even though it has fallen back a little since then. So, should I be adding the stock to my portfolio? To answer that question, let’s take a look at what Roblox does and the challenges that lie before it.

A gaming giant for younger audiences

Roblox is a video game company. But unlike a typical game developer, the players are the content creators. They can design and share their own mini-games, levels, and puzzles without needing any advanced programming knowledge. I think this is rather ingenious. Let me explain why.

Games usually only have a limited amount of content. And so, the player base begins to contract within a relatively short period of time. But by having a continuous stream of new content being created by the players, Roblox extends its playable lifespan at little expense beyond keeping the servers online and tools up to date.

In addition, this generates a network effect. As new players join the community they have an enormous library of experiences to enjoy. Some of these new players may try their hand at creating their own mini-game within Roblox. This in turn adds more content that attracts even more players and the cycle repeats itself. In my experience, network effects are powerful business drivers. Therefore I think the Roblox share price may be able to grow substantially in the future. But as with every investment, there are risks to consider.

Several risks lie ahead

Over the last 16 years since Roblox launched, its player base has grown to over 31 million daily active users. However, the vast majority of these players are children. This exposes the company to additional online legislation that provides greater protection to younger people when interacting online. Any breach of these laws would land the business with substantial fines, as well as significant reputational damage that would likely cause the Roblox share price to suffer.

Another risk to consider is how Roblox makes money. The game itself is actually free to play, but players can purchase in-game currency to unlock extra content through micro-transactions. Making the game available for free has undoubtedly helped in growing the player base. However, each additional player increases server costs and not all of these individuals will end up spending any money. Consequently, the firm is currently unprofitable, with no clear guidance as to when that may change. 

Should I buy Roblox at its current share price?

I really like the business model of Roblox, as it has some significant advantages over competing video game developers. However, as an investor, I think the Roblox share price is far too high.

The current market capitalisation of the company is just over $38bn. Comparing that to the $589m of revenue generated in the first nine months of 2020 places the P/S ratio at around 64. Personally, I think there are other growth opportunities available right now at far better prices, so I’m not adding the stock to my portfolio today. 

The post The Roblox share price surged 60% in its first day of trading! Should I buy the US stock? appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in Roblox. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A hidden growth opportunity in the gaming sector?

Keywords Studios (LSE:KWS) is a service provider for the video games industry. With multiple studios in its portfolio, the tech stock offers a wide range of services – including art & marketing, game development, audio, quality assurance, and localisation testing.

Today it serves 23 of the top 25 game developers across 60 countries around the world. This includes World of Warcraft developer Activision Blizzard, and Halo creator Microsoft.

Developing a video game today is an expensive process. If a project fails to meet expectations it can have serious financial consequences for studios. In order to minimise risk, most studios only retain a small team of permanent staff. The rest of the talent is provided by companies like Keywords Studios.

Recently, Keywords made two announcements that have re-affirmed my belief that the firm is on the right path.

This tech stock is beating expectations

The first was a quick trading update. Full-year revenue is expected to be in line with company guidance at €367m – a 12.5% increase on last year. Furthermore, the adjusted pre-tax profit is coming in 12% higher than expected at €52m.

Interestingly, the significant increase in pre-tax profit is primarily from improved operating margins as a result of a work-from-home policy. The reduced fixed costs may result in the policy remaining in place in some form even after the pandemic. If so, these margin improvements could remain as well.

Both figures continue to show that despite the disruptions from the Covid-19 pandemic, the firm has continued to thrive. With the next generation of consoles already sold out, it’s clear that the popularity of gaming isn’t declining. This suggests there’s an ever-increasing capacity for growth.

The studio is expanding!

Speaking of growth, the tech stock continued to execute its acquisition-based growth strategy. Keywords just added g-Net Media, an American marketing service provider, to its portfolio for $32m.

Founded in 2001, g-Net has been serving top entertainment companies – such as Netflix and Amazon Prime – as well as leading video game publishers. Both Activision Blizzard and Microsoft are among these, thus furthering the existing relationship these studios have with Keywords.

But, it’s important to remember that acquisitions always carry risk. g-Net, while well known within the industry, is still relatively small, with revenues of $16.3m for 2019. It’s good to see management acknowledge this and included specific terms in the buyout agreement. So far, only $18m has been paid using cash and shares. The remaining $14m is dependent on the studio meeting performance milestones.

The bottom line for this tech stock

The tech stock has yet to make any catastrophic errors in its acquisitions, and seeing performance-based terms in their buyout agreements lowers the risks involved. I believe this prudent approach to business, combined with the delivery of high-quality services, means Keywords Studios is on the path to exceptional growth for many years to come.

The post 1 tech stock I’d buy and hold forever appeared first on The Twelfth Magpie.

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Zaven Boyrazian owns shares in Keywords Studios. The Motley Fool UK has recommended Keywords Studios. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

eSports: here to stay

You probably don’t need me to tell you that the lockdowns in 2020 have been hugely beneficial to raising the profile of gaming and eSports. With nowhere to go, huge swathes of people (re)discovered their inner gamer to pass the time and make new, digital contacts. If they weren’t playing themselves, they were watching other people do so via streaming service Twitch.

This rapid acceptance and adoption should mean the gaming-related boom keeps going even when the pandemic is over. It’s already been estimated that the global eSports audience will hit 495 million people in 2020.

Other developments that highlight eSports’ growing profile include the involvement of bookmakers. With no opportunities for punters to gamble on ‘traditional’ sports, firms such as William Hill have been taking bets on the outcomes of gaming matches.

Another sign of the times was the launch of talent development company Guild Esports in June. Co-owned by David Beckham, its goal is to find and nurture the next generation of professional players. While certainly not guaranteed to succeed, Beckham joins a growing list of sports stars such as Michael Jordan and Mike Tyson making investments in the video gaming industry. 

Here’s how you can join them.

How to invest

The most direct route into gaming as an investor is to buy a developer. UK-listed candidates include Codemasters, Frontier Developments and Team 17. Another option is ‘picks and shovels’ company Keywords Studios. It specialises in providing a variety of services to the video games industry. 

All of the above appear to be decent businesses with solid futures. The problem, however, is that most trade on frothy valuations due to the recent post-crash buying frenzy seen in the market.

Keywords-excluded, owning shares in a single, gaming-related company can also be risky. Much like a movie studio, a lot of money may rest on a new title living up to the hype. Should it not, some holders won’t hesitate to dump their stock.

Personally, I’m taking a different route.

My preferred pick

The VanEck Vectors Video Gaming and eSports UCITS ETF launched just over one year ago. Tracking the MVIS Global Video Gaming and eSports Index, it gives exposure to 25 companies. Importantly, all of these generate more than 50% of their revenue from the industry. Portfolio holdings include giants such as Nintendo and Tencent. Developer Activision Blizzard also features, as does Electronic Arts.

Based on performance so far, the 0.55% ongoing fee certainly doesn’t seem excessive. From inception (24 June 2019) to the end of July 2020, the fund’s net asset value climbed an astonishing 63%!

Buyer beware

Of course, no investment is a nailed-on home run. There will be setbacks along the way, perhaps in the form of increased regulation. The threat posed by cybercriminals shouldn’t be easily dismissed either. 

With a young, global, increasingly-affluent audience and new consoles (Playstation 5 and Xbox Series X) coming soon, however, the outlook for this coronavirus-proof industry looks rosy. In fact, I think gaming/esports could prove to be one of the best investment themes of the decade.

The post I think eSports could make investors filthy rich. Here’s how I’m playing it appeared first on The Twelfth Magpie.

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• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
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Paul Summers owns shares in VanEck Vectors Video Gaming and eSports UCITS ETF. The Motley Fool UK owns shares of and has recommended Activision Blizzard. The Motley Fool UK has recommended Frontier Developments and recommends the following options: long January 2022 $75 calls on Activision Blizzard and short January 2022 $75 puts on Activision Blizzard. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

In terms of stocks, this means turning a potential crisis into a buying opportunity, especially for top growth shares.

Growth stocks are often expensive

Under normal circumstances, one of the problems with buying shares with good prospects is they usually sell at correspondingly high prices. You may be right about their futures, but you can easily overpay for the expected gains.

In other words, the investment case for the company itself is sound, but the price is too high. This makes the purchase risky.

The ideal scenario is to purchase these same stocks when they’re selling at a much lower price-to-earnings (P/E) ratio, such as during a stock market crash. If and when the next crash happens, I’m hoping the following two shares will provide me with buying opportunities.

Codemasters Group Holdings

Codemasters (LSE: CDM) is a racing video game developer and publisher and is the company behind Formula 1. The video gaming industry has been one of the areas to thrive during the pandemic period. With many people stuck at home, gaming is in demand, and opportunities for gaming companies abound. Any lockdown resulting from a second wave of infections may produce the same.

But Codemasters is more than just a reactive investment opportunity. Over the last five years, its revenues have increased by 145%, its operating profit by 436%, and earnings per share (EPS) have soared from a negative 6.1p in 2016 to 8.9p in 2020. It’s certainly a profitable revenue generator, unusual for a technology company.

In addition to these qualities, Codemasters records a current liquidity ratio of 1.89, indicating the firm can easily meet its short-term financial obligations. A debt-to-equity ratio of 0.54 also shows the company is potentially solvent in the longer term too.

However, the market has all these qualities priced-in. Codemasters currently trades on a P/E of 41.6, far too high for my liking. But if a second stock market crash were to happen, I’d be eagerly waiting for this to drop under the industry P/E average of 27.  

Team17 Group

Team17 (LSE: TM17) is another video gaming growth stock, known for its classic Worms game. Like its AIM-listed peer above, it has also benefited from recent market opportunities. However, it has recorded an even more impressive set of financials over the last five years.

Revenues have increased by 495%, operating profit is up 388% and EPS have risen from 2.4p in 2015 to 12.9p in 2019. Team17 boasts a current liquidity ratio of 4.52, meaning it has plenty of resources to finance its short-term commitments. It also has limited debt. 

However, currently trading on a P/E of 42.5, the market already knows Team17 is a good investment case. A purchase now would be highly speculative, given its price. As with Codemasters, I’d prefer to wait for a P/E under 27.

Both these video gaming companies are great performers. However, I think they’re both currently expensive, and therefore risky purchases. A second stock market crash could change that and provide two great buying opportunities. 

The post My top 2 growth stocks to buy in a second stock market crash appeared first on The Twelfth Magpie.

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Rachael FitzGerald-Finch has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.