Perfect World Co., Ltd

Company Description

Perfect World develops online gaming in China. The company specializes in huge multi-player games that drive revenue through either time spent playing or individual purchases. While a majority of cash flow is from China it also licenses its games in 11 other countries.

Raising Guidance

In a June 19th press release Perfect World raised its forecast for second-quarter revenue. The company expects revenues to be up 15-20% on a sequential basis, which is up from a between a 2% decline and 2% growth. A better than projected release of its latest game and expansion packs gave management much more confidence for the quarter.

A Winning Quarter

On May 18 the company released results for its first quarter of 2009. There was a down turn in number of players, 615,000 from 660,000, but revenue per player was up 62%.

Perfect World earned $31.5 million, which is a 36% increase based on the local currency, the Yuan. The end result was EPS of 56 cents, beating expectations by 11 cents. It was the seventh surprise in the only 7 quarters the company has reported.

Analysts Love It

Given the developments over the past 3 months it is no surprise that analysts have been raising estimates. The current full-year consensus is now $2.48, up from $2.12. Projections for nest year are now averaging $2.86, up from $2.47.

If these forecasts are met, it would be a 38% earnings growth rate for this year and another 15% next year.

Trading at a Bargain

Despite recent success shares are still exchanging ownership at a good value. One share will cost you about 15 times current earnings and just 12 times forward. The PEG ratio is a low 0.4.

The Chart

Shares were a bit over-extended after the upgraded guidance, but have returned to the developed trend line. Take a look below.

Read the full analyst report on PWRD