If you are an avid gamer, you are probably familiar with titles such as World of Warcraft, Diablo, Overwatch, Call of Duty, as well as Candy Crush – they are games developed by the NASDAQ-listed company Activision Blizzard (NASDAQ:ATVI) – I’m pretty sure you’ve heard about the company before as well.

Before I proceed to look into the company’s historical financial performances, debt profile, and dividend payout over the years (between FY2015 and FY2020), let me share with you some brief introduction about the US-listed company:

Formed in July 2008 as a result of the merger between Activision Inc., and Vivendi Games, Activision Blizzard Inc. is in the business of developing and distributing content and services on video game consoles, personal computers, as well as on mobile devices. They also operate esport leagues and offer digital advertising within their content. The company has a financial year-end every 31 December.

With that, let us now dive in to study its historical statistics:

Financial Performance (between FY2015 and FY2020)

Total Revenue, Net Profit, and Net Profit Margin:

FY2015FY2016FY2017FY2018
Total Revenue
(US$’mil)
$4,664m$6,608m$7,017m$7,500m
Net Profit
(US$’mil)
$892m$966m$273m$1,848m
Net Profit
Margin (%)
19.1%14.6%3.9%24.6%
FY2019FY2020
Total Revenue
(US$’mil)
$6,489m$8,086m
Net Profit
(US$’mil)
$1,503m$2,197m
Net Profit
Margin (%)
23.2%27.2%

Activision Blizzard Inc.'s Total Revenue and Net Profit between FY2015 and FY2020

Activision Blizzard’s total revenue saw year-on-year (y-o-y) improvements in 5 out of the 6 financial years I have looked at – growing at a compound annual growth rate (CAGR) of 9.6%.

In terms of its net profit growth in the same time period, it saw improvements in 4 out of the 6 financial years I have looked at. Of note is the 71.7% drop in its net profit in FY2017, due to it recognising approximately US$1.04 per share in incremental GAAP expense due to the impact of significant discrete tax-related items, primarily related to the impact of the Tax Cuts and Jobs Act enacted in December 2017. Despite of that, Activision’s net profit still managed to grow at a CAGR of 16.2% over a 6-year period – pretty impressive in my opinion.

Finally, its net profit margin growth in my opinion has been pretty irregular over the years.

Return on Equity (%):

For the benefit of those who may be seeing this for the first time, basically, Return on Equity (RoE) is a measure of the company’s profitability (in percentage terms) for every dollar of shareholders’ money it uses in its businesses.

Now, let us take a look at the RoE of Activision Blizzard between FY2015 and FY2020 which I’ve computed:

FY2015FY2016FY2017FY2018
Return on
Equity (%)
11.1%10.6%2.9%16.2%
FY2019FY2020
Return on
Equity (%)
11.7%14.6%

Activision Blizzard Inc.'s Return on Equity between FY2015 and FY2020

Similar to the growth of its net profit margin (which I have looked at earlier), the growth of the company’s RoE over the past 6 financial years have fluctuated as well.

Debt Profile (between FY2015 and FY2020)

As usual, other than the company’s financial performance, another area I look at is its debt profile – personally, my preference is towards companies with minimal or no debt, as well as one that is in a net cash position.

With that, let us take a look at Activision Blizzard’s debt profile over the past 6 financial years (between FY2015 and FY2020):

FY2015FY2016FY2017FY2018
Cash & Cash
Equivalents
at the End of
Period
(US$’mil)
$1,823m$3,262m$4,720m$4,229m
Total
Borrowings
(US$’mil)
$4,074m$4,887m$4,390m$2,671m
Net Cash/
Debt
(US$’mil)
-$2,251m-$1,625m+$330m+$1,558m
FY2019FY2020
Cash & Cash
Equivalents
at the End of
Period
(US$’mil)
$5,798m$8,652m
Total
Borrowings
(US$’mil)
$2,675m$3,605m
Net Cash/
Debt
(US$’mil)
+$3,123m+$5,047m

Apart from in FY2015 and FY2016 (where the company is in a net debt position), the other years saw the company in a net cash position – what’s even more encouraging to note is that since it turned into a net cash position in FY2017, its net cash position has been recording improving every year – this can be attributed by a strong improvements in its cash and cash equivalents.

Dividend Payout to Shareholders (between FY2015 and FY2020)

The management of Activision Blizzard declares a dividend payout to its shareholders on an annual basis (i.e. once every financial year.)

However, one thing you need to take note of if you are a Singapore citizen investing in US-listed companies – all dividends declared are subjected to a 30.0% withholding tax; meaning all dividend payouts that you receive will be 30.0% less than what was declared by the company.

With that, let us take a look at the dividend payout to shareholders of Activision Blizzard over a 6-year period, along with its payout ratio:

FY2015FY2016FY2017FY2018
Dividend Per
Share
(US$’cents)
26.0
cents
30.0
cents
34.0
cents
37.0
cents
Dividend
Payout Ratio
(%)
21.8%23.4%94.4%15.4%
FY2019FY2020
Dividend Per
Share
(US$’cents)
41.0
cents
47.0
cents
Dividend
Payout Ratio
(%)
21.0%16.7%

Activision Blizzard Inc.'s Dividend Per Share between FY2015 and FY2020

Over a 6-year period, Activision Blizzard’s dividend payout have increased every single year – from 26.0 cents/share in FY2015 to 47.0 cents/share in FY2020 – a CAGR growth of 10.4%.

In terms of its payout ratio, apart from in FY2017, all the other years saw the company maintaining its payout ratios at under 25.0%.

Is the Current Share Price of Activision Blizzard Considered ‘Cheap’ or ‘Expensive’?

One of the ways I use to find out whether or not the current share price of a particular company is considered ‘cheap’ or ‘expensive’ is by taking its current valuations (based on its current share price), and compare it against the company’s average valuations recorded over the years.

That said, at the time of writing, the share price of Activision Blizzard was trading at US$92.58, and as such, its current valuations is as follows (taken from the ShareInvestor WebPro platform):

P/E ratio: 32.6
P/B ratio: 4.8
Dividend Yield: 0.5% (computed based on the company’s dividend payout of 47.0 cents/share in FY2020)

The following table is the company’s valuations between FY2015 and FY2020, along with its average that I’ve calculated:

FY2015FY2016FY2017FY2018
P/E
Ratio
32.528.2175.919.4
P/B
Ratio
3.53.05.13.1
Dividend
Yield (%)
0.7%0.8%0.5%0.8%
FY2019FY2020Average
P/E
Ratio
30.532.953.2
P/B
Ratio
3.64.83.8
Dividend
Yield (%)
0.7%0.5%0.7%

Comparing its current valuations against its 6-year average, it seems like the current share price of Activision Blizzard is considered to be slightly on the ‘expensive’ side due to its slightly higher-than-average current P/B ratio, along with its slightly lower-than-average current dividend yield.

In Conclusion

To wrap up, there are pros and cons about Activision Blizzard’s historical statistics – first the pros: its top- and bottom-line have recorded a good CAGR over the past 6 years (at 9.6% and 16.2% respectively), the company is in a strong net cash position (since reversing from a net loss position in FY2017), and its dividend payout to shareholders have recorded improvements in all of the 6 financial years I have looked at.

As for the cons – it will be the company’s irregular growth in its net profit margin, as well as in its RoE over the past 6 years.

Having said that, this post is by no means a buy or sell recommendation for the company’s shares. Please do your own due diligence before you make any investment decisions.

With that, I have come to the end of my share about the NASDAQ-listed company Activision Blizzard Inc. today. Hope you’ve enjoyed the read, and here’s wishing you a great week ahead!

Disclaimer: At the time of writing, I am not a shareholder of Activision Blizzard Inc.

 

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