What counts as a “normal” P/E depends on how much growth investors expect and how much risk they see in those earnings. Higher expected growth or lower perceived risk can support a higher P/E, while lower growth expectations or higher risk often line up with a lower P/E.

GameStop currently trades on a P/E of 21.94x. That is close to both the Specialty Retail industry average P/E of 20.67x and a peer average of 20.77x, so on simple comparisons the pricing looks broadly in line with similar businesses. Simply Wall St also uses a proprietary “Fair Ratio” for the preferred multiple, which reflects factors like earnings growth, industry, profit margin, market cap and company specific risks to estimate what a more tailored P/E might be.

Because the Fair Ratio blends these company characteristics rather than just matching peers or the industry, it can give a more customised view of what P/E may make sense. In this case, the Fair Ratio is not available, so it is not possible to determine whether the current 21.94x P/E suggests the shares are overvalued or undervalued relative to that benchmark.

Result: ABOUT RIGHT

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1450 companies where insiders are betting big on explosive growth.

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, a simple way for you to attach a clear story about GameStop to your own forecast for its future revenue, earnings, margins and fair value, then compare that fair value with today’s share price to help you decide what to do.

On Simply Wall St, Narratives live in the Community page and let you combine your view of the business with the numbers. This means your story about store closures, cash levels, Bitcoin exposure, digital plans or meme stock volatility is directly linked to a financial model that updates when new news or earnings arrive.

For example, one GameStop Narrative on the platform currently has a fair value close to US$120 per share, while another has a fair value near US$11.91. This shows how different investors can look at the same company, weigh the same facts in different ways and still use the same tool to keep a clear price versus value framework.

For GameStop, however, we’ll make it really easy for you with previews of two leading GameStop Narratives:

Each one ties a clear story about the business to a fair value estimate. This allows you to see how different views stack up against the current share price of US$20.66.

🐂 GameStop Bull Case

Fair value in this narrative: US$120.00

Implied discount to this fair value: 82.8% below the narrative fair value

Revenue growth assumption: 0%

• Points to Q1 2025 adjusted EPS of US$0.17 and a US$44.8 million net profit, alongside a large cash position reported at US$6.4b and no long term debt, as signs of financial flexibility.

• Highlights 4,710 Bitcoin held, described as worth US$516.6 million at a referenced Bitcoin price near US$112,000, plus store closures and exits from markets such as Canada and France as cost cutting aimed at supporting margins.

• Emphasises a committed retail shareholder base, including shares held through the Direct Registration System and an insider share purchase reported in an SEC Form 4 filing, as part of a thesis that long term holders see substantial upside.

🐻 GameStop Bear Case

Fair value in this narrative: US$11.91

Implied premium to this fair value: 73.6% above the narrative fair value

Revenue growth assumption: 0%

• Frames GameStop as a retailer that has faced pressure as gaming has shifted toward digital distribution and online competitors, with efforts under CEO Ryan Cohen focused on cost cuts, closing underperforming stores and higher margin products.

• Notes steps into areas such as a Zip Buy Now, Pay Later option and interest in cryptocurrencies, but flags that crypto exposure could add uncertainty and that the long term impact of these moves on the business is unclear.

• Stresses the effect of meme stock trading, past price spikes and renewed attention around well known personalities, and argues that sentiment swings and speculation can make the shares risky for investors focused on fundamentals.

Together, these two Narratives show how reasonable people can look at the same company, weigh the same facts very differently and still keep their thinking tied to a specific fair value per share. If you want to see the underlying models and assumptions in full, and build your own view, you can start with these community Narratives and then adjust them to match your outlook.

Curious how numbers become stories that shape markets? Explore Community Narratives

Do you think there’s more to the story for GameStop? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include GME.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com