Will Shares of Electronic Arts Always be Second-Best?

With shares of Electronic Arts (NASDAQ:EA) trading around $14.85, is EA an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Technicals on the Stock Chart are Mixed

Electronic Arts hit its 52-week low of $10.77 per share late in July following a long side precipitated by guidance that repeatedly came in below expectations. However, since then the stock has posted relatively steady gains and as of November 29 is 9.45 percent above its 20-day simple moving average, or SMA; 12.24 percent above its 50-day SMA, and 6.33 percent above its 200-day SMA.

But since the beginning of 2012 the stock has been in a pronounced downward trend, falling 29.44 percent this year to date and 35.19 percent year over year. For comparison, shares of Activision Blizzard (NASDAQ:ATVI) have come down 6.07 percent this YTD and 7.73 percent Y/Y.

As a benchmark, the S&P 500 has gained 10.88 percent this YTD and 13.55 percent Y/Y.

E = Excellent Mediocre Performance Relative to Peers

Many investors favor return on equity as a key metric to diagnose how well a company is performing. Electronic Arts can just barely claim a positive ROE at 0.64 percent. This is a far cry from Activision Blizzard, which clocks in at an industry high of 8.17 percent, but is clearly above the rest of the competition. Take-Two Interactive Software Inc. (NASDAQ:TTWO) logs an ROE of -33.51, and social game developer Zynga (NASDAQ:ZNGA) is a tragedy at an ROE of -69.0 percent.

Operating margins are also a critical metric for evaluating a stock’s performance. On this metric as well Electronic Arts barely falls on the positive side of the fence with an operating margin of 0.81 percent. This compares to Activision Blizzard, which once again leads the industry with an operating margin of 22.07 percent. Rounding out the score is Take-Two with an operating margin of -16.49 percent and everyone’s favorite punching bag Zynga with an operating margin of -55.19 percent.