GameStop (NYSE:GME) lost about 40% of its market value over the past three years, as rising digital downloads and declining mall traffic throttled its growth. However, that plunge reduced GameStop's forward P/E to 6 and boosted its forward dividend yield to nearly 10%. Do that low valuation and high yield make GameStop an undervalued income stock? Or is that high yield a red flag indicating that its core business is deteriorating?
Is GameStop an undervalued income stock? GameStop's stock is cheap for obvious reasons, and I don't think the dividend is worth the risk. The dividend could be easily sustained by its FCF after the Spring Mobile deal, but that cash would arguably be better spent on improvements to its core businesses.
Source: Motley Fool
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