One of the most popular companies on the WSE, i.e. CD Project, has been putting investors' patience to the test for a long time. In the last year, the stock price fell, despite the fact that at that time the company's results frequently hit analyst forecasts by dozens of percent.
The late published quarterly study one more time showed large numbers. At the same time, valuation indicators propose that CDR is simply expensive. So will this time end with short-term euphoria? The studio late announced a fresh addition to Witch 3, as well as its free remaster. We besides know erstwhile to anticipate the 4th part of the game that has made the CDR celebrated all over the world. So let's check the characteristics of the company and see if the current stock rate can be considered attractive.
Important change in business CD Project
Over the years, the company operated in a reasonably predictable rhythm. First, an atmosphere of waiting around the fresh title was built, and marketplace signals with a affirmative reception of the game drove the stock rate. All so that profits will be made rapidly around the debut. This can be seen from the example of Cyberpunk 2077.
The historical highest of CD listings The task of autumn 2020 rapidly turned into an avalanche of inheritances, due to delays in Cyberpunk 2077 premiere. marketplace assurance yet collapsed after the December debut as players collided with the mediocre method condition of the game on consoles. As a consequence of these disappointments, within 2 years of the pre-prime hossy the share rate dived by more than 80%, as can be seen below.
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Technical problems were the direct origin of specified a strong discount, but the main challenge for the company remained the deficiency of a regular Prime Minister cycle and the dependence of the full business on one, developed task years. present CD task evolves towards more predictable business with regular and repetitive revenues. All by narrowing down the Prime Minister's calendar and creating respective projects simultaneously. This is what aims to guarantee that further games do not carry as much hazard of "sale of facts" as before.
However, switching to a serial model requires adequate financial opportunities. Maintaining nearly a 1000 developers working on respective projects at the same time costs hundreds of millions of PLN per year. Where does the CD task get the money for this if it hasn't released a fresh large game in years?
When earnings finance all development
One of the features of the CD task is the ability to make large margins against the industry. In the ranking below, we see that the gross margin of as much as 93% translates into a net consequence of 65%. It is worth adding that the median of comparable companies (peers) for the net margin is 24.6%.
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Let us remember that this is the data presented at a time erstwhile the company is intensively developing fresh titles and earning mainly on older games, and inactive current net results exceed the five-year median by as much as 68%. So this is simply a very strong side of the full business. CD The task stands out against competition in terms of its ability to make profits for respective crucial reasons:
- The vast majority of the company's titles are sold in digital form, which importantly reduces the costs of pressing plates, boxes, logistics and eliminates the impact of conventional retail margins.
- After selling the GOG.com platform in late 2025, CD The task no longer retains 100% of its gross from the sale of its games in this store, but thanks to a peculiar distribution agreement it inactive uses highly low commissions there.
- Titles specified as Witchman 3 and Cyberpunk 2077 make unchangeable sales years after the debut. As production costs have long returned, the company no longer incurs crucial expenses to make or global marketing these games.
- Many planet studios make licensed games (e.g. Marvel, Star Wars, Indiana Jones), giving a crucial percent of gross to rightsholders. CD The task itself has full rights to make games in the universities of Witch and Cyberpunk. In the case of upcoming titles, the only crucial external cost will be the taxation on the usage of the Unreal Engine 5 engine of around 4% on gross sales.
- External adaptations, specified as Netflix's series (Wiedźmin, Cyberpunk: Edgerrunners), service as free advertising campaigns. They drive players back to games periodically, which translates into an increase in sales at virtually zero cost on the CD side of the Project.
Most importantly, a advanced margin ]]>allows to make large amounts of cash]]>. This shows an OCF/sale rate of up to 75.2%. It means that the company can convert all penny of gross into over 75 cents of cash. On the basis of the number of shares, this gives PLN 6.24 per share.
Continue reading: ]]>CD task after results! Is this a good time to buy?]]>
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Author: ]]>Paul Cream]]>
