Auditing research paper Essay Example | Topics and Well Written Essays - 500 words

Auditing research paper - Essay Example The digital sales increased by 53% over last year and net earnings increased by 6.9% to $80.4 million. Earnings per share went up by 17%. (GameStop Reports†¦) Due to previously announced planned investments and due to some strategic initiatives the earning per share in second quarter is likely to decline by $0.04 per share. The full year diluted earnings per share is estimated at $2.82 to $2.92 that is a rise of 6.4% to 10.2% over the last year of 2010. That means net earnings will be in the vicinity of $440 million to be up by almost 8-9% in comparison to last year of 2010. (GameStop Reports†¦) On the matter of quality of earnings, It will be pertinent to state that GameStop achieved record sales of $9.47 billion and net earnings of $408 million (up by 8.1%) in the year 2010. The last year’s earnings in the difficult market condition should be considered good as it shows increase in earnings by almost 8%. Net earnings to sales ratio is 4.3% that is also commendable. GameStop could generate $590 million of operating cash flow and reduced debt by $200 million that truly displays the quality of its earnings. (Brightman 2011) In view of the solid earnings performance, BB&T Capital Markets upgraded GameStop from hold to buy ratings with a $32 price target. The main reason for upgrading cited by BB&T is declining competition in the high margin used game market. Overall capital market’s response to the company was quite encouraging last year (Wilcox, 2010). Lazard Capital Market analyst commented stating that this is a notable achievement. He further stated that even assuming slow growth, digital will promise more than 0.5 billion revenue to GameStop in next two years. GameFly is a new entrant in the capital market hence it will take some time to have full-fledged financial data of the company; however, when compared with industry average it is found that GameStop is a low debt company that certainly displays it strength. Even