The “let’s catch a falling knife” trade in Zynga stock is on. Large players volume is soaring higher while the stock plunges lower. What a divergence!
Zynga reported earnings back on November 7, 2017. The company reported EPS of $0.02 versus the $0.01 estimate. Revenue also beat coming in at $224.6 million versus the $211.98 million estimate. Zynga’s revenue for the quarter was up 23.1% year-over-year.
On November 29, 2017, Zynga announced that it has acquired Peak Games’ mobile card game business for $100 million, in a deal that’s expected to close in Q4 2017. Peak Games is a digital games publisher based in Turkey that has popular titles such as Spades Plus and Gin Rummy Plus. Zynga said that the acquisition would strengthen its portfolio of card games.
Zynga Inc. is a provider of social game services. The Company develops, markets and operates social games as live services played on mobile platforms, such as iPhone Operating System (iOS) operating system and Android operating system and social networking sites, such as Facebook. You can read more about the company on their website.
Large players are playing “Who Wants To Catch a Falling Knife”. Normally I would never even consider such a risky trade but look at the soaring large players volume! The Twiggs Money Flow is negative so caution is warranted. For a good entry, it is better to wait for a consolidation but if large players are trying to catch a falling knife here, I’m thinking we should too. I would prefer to wait for a candle over candle reversal though.
Zynga Inc. Review
The Piotroski-F score of ZNGA is 7.00. This is a strong score and indicates good health and profitability for ZNGA. ZNGA's Return On Assets of -1.13% is in line with the rest of the industry. The industry average Return On Assets is -1.00%. ZNGA's Profit Margin of -2.65% is in line with the rest of the industry. The industry average Profit Margin is -1.83%. The profitability ratios for ZNGA are negative, so there is not much use analyzing them.
ZNGA's low PEG Ratio, which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company. When comparing the price book ratio of ZNGA to the average industry price book ratio of 4.61, ZNGA is valued rather cheaply. With a price book ratio of 2.04, ZNGA is valued correctly. The Price/Earnings Ratio is negative for ZNGA. In the last year negative earnings were reported. The Forward Price/Earnings Ratio of 63.58 indicates a quite expensive current valuation of ZNGA. Compared to an average industry Enterprise Value to EBITDA ratio of 22.21, ZNGA is valued more expensive than its industry peers. 96% of the companies listed in the same industry are valued cheaper.
The Earnings Per Share has grown by an impressive 81.80% over the past year. ZNGA is expected to show a strong growth in Earnings Per Share. In the coming 2 years, the EPS will grow by 158.12% yearly. The EPS growth is accelerating: in the next 2 years the growth will be better than in the last years. Looking at the last year, ZNGA shows quite strong growth in revenue. Revenue has grown by 11.13% in the last year. Revenue has been decreasing by -8.57% on average over the past 5 years.
ZNGA has a Current Ratio of 3.72. This indicates that ZNGA is financially healthy and has no problem in meeting its short term obligations. The Current Ratio of ZNGA is much better than the industry average of 1.63. ZNGA has a better rating than 87% of its industry peers. ZNGA has a Quick Ratio of 3.72. This indicates that ZNGA is financially healthy and has no problem in meeting its short term obligations. The Quick Ratio of ZNGA is much better than the industry average of 1.63. ZNGA has a better rating than 86% of its industry peers. An Altman-Z score of 6.53 indicates that ZNGA is not in any danger for bankruptcy at the moment. ZNGA is in better financial health than average in its industry. Its Altman-Z score is much better than the industry average of 3.89. The Piotroski-F score of ZNGA is 7.00. This is a strong score and indicates good health and profitability for ZNGA. The Debt to Equity ratio of ZNGA is in line with the industry averages.
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