Capcom Vs. Bandai Namco: Both Buys, But Bandai Namco Wins On Value And Upside
Photo Credit: Michael Ocampo, CC BY 2.0, via Wikimedia Commons
Excerpt
The following is a 250-word excerpt from my full article on Seeking Alpha: A crowdsourced financial market content service where investors can share ideas, discuss news, and make informed investment decisions. To view the full article without a paywall, please click on the link below:
https://seekingalpha.com/article/4829814?gt=71fc85eb24c76b92
Summary
Capcom compounds through digital scale, high margins, strong free cash flow, and low reinvestment needs.
Bandai Namco trades near 12.4x EV/EBITDA versus a 20.3x peer median despite global IP like Elden Ring, Gundam, and Dragon Ball.
Twelve-month upside estimates: 13.5% for Capcom and 36.7% for Bandai Namco based on forward EBITDA growth and reasonable multiples.
I rate both Buy, but Bandai Namco is my top pick given its valuation discount and re-rating potential.
Near-term catalysts include Resident Evil Requiem, Street Fighter 6 DLC, and Monster Hunter Stories 3 for Capcom, while Bandai Namco executes a focused digital rebuild around Elden Ring and Tekken.
Investment Thesis
Capcom (OTCMKTS:CCOEY) (OTCMKTS:CCOEF) and Bandai Namco (OTCMKTS:NCBDY) (OTCMKTS:NCBDF) represent two different types of companies within Japan's entertainment empire: Capcom is a digital growth company, while Bandai Namco is a diversified value play. Capcom's ability to scale digitally has meant exceptional margins, exceptional free-cash-flow conversion, and low reinvestment needs, which supports the company's long-term vision of a 10% increase in YoY operating income growth. Meanwhile, Bandai Namco trades at an EBITDA multiple of 12.36 in comparison to its peer median of 20.31, representing a valuation gap of 64.32% despite owning global IPs such as Elden Ring, Gundam, and Dragon Ball. With EBITDA forward growth rates of 16.8% and 23.2%, respectively, I estimate a 12-month upside potential of 13.47% for Capcom and 36.73% for Bandai Namco, giving both companies solid buy ratings. Nevertheless, Bandai Namco is my preferred pick due to its valuation gap and its greater rebound potential…
