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Perfect World (PWRD - Snapshot Report)
is a Zacks #1 Rank (Strong Buy) after posting eight of nine
positive earnings surprises.
Perfect World Co., Ltd., through its subsidiaries, operates as an online game developer and operator in China, the United States, and Japan. The company develops online games based on its proprietary game engines and development platforms. It offers 3D massively multiplayer online role playing games (MMORPGs), which include Perfect World, Legend of Martial Arts, Perfect World II, Zhu Xian, Chi Bi, Pocketpet Journey West, and Forsaken World; Hot Dance Party, a 3D online casual game; two 2.5D MMORPGs, namely Battle of the Immortals and Empire of the Immortals; one 2D turn-based MMORPG, Fantasy Zhu Xian; and one 2D real-time MMORPG, Dragon Excalibur. It also involves in the production and distribution of films, as well as television advertising activities. The company was founded in 2004 and is based in Beijing, China.
PWRD Tops Expectations in Three of Last Four Quarters
Perfect World has beaten the Zacks Consensus Estimate in three of the
last four quarters. In those three beats, the company has trounced estimates by an average of more than 50%, and Wall Street has taken notice. Following the beats, the stock has moved, 9.6%, 16% and 24% respectively.
The lone miss in the last four quarters came in the September 2011 quarter, where the company reported EPS of $0.45, $0.18 or 28% below the Zacks Consensus Estimate. Revenue also came in $1 million light of expectations and Wall Street did not appreciate the large miss, sending shares down by almost 22%.
Perfect World's Most Recent Earnings Report
On March 15, 2012 the company reported revenue of $123 million
roughly $11 million more than the Zacks Consensus Estimate and
higher than the $90 million reported in the year ago period. EPS
of $0.87 was $0.33 higher than the Zacks Consensus Estimate or a 61% earnings
the report, the stock moved higher by 24%.
Next Earnings Report In May
Perfect World reports earnings in mid May. The Zacks Consensus Estimate is calling for $117
million in revenue and $0.77 of EPS. Analysts have bumped up estimates for the quarter following the recent blowout. The Estimate for 1Q12 was at $0.74 prior to earnings. The same is true for next quarter as estimates for moved from $0.74 to the current level of $0.83.
Perfect World has a valuation that will bring value players into this aggressive growth play. At 4.5x trailing twelve months PE, and 3x forward PE, the stock is trading at a steep discount to the industry averages 17x and 15x respectively. Price to book has PWRD trading at less than 1x and its prices to sales multiple of 1.25x is well below the 3.5x industry average.
A quick look at the recent price action for Perfect World shows the stock breaking out following the most recent earnings report on March 15. That move pushed the stock over the 200 day moving average, something technicians would say is a bullish indicator. With more consistency in beating earnings, PWRD just might find itself in a perfect situation due to its increased estimates and low valuation.
Perfect World is a Zacks #1 Rank
Brian Bolan is the Aggressive Growth Stock Strategist
Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor
service You can follow him at twitter.com/bbolan1
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