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US Equities · Finance research note

EA — Electronic Arts

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2. Company Fundamentals

2.1 Competitiveness

Metric Value
Operating Margins 24.01%
Profit Margins 11.78%
Return on Equity 13.49%
Return on Assets 5.7%
Free Float 0.21B
Dividend Yield 0.37%
Short Int % Utilisation 4.38%

2.2 Growth

Metric Value
Revenue Growth 11.9%
Free Cash Flow 2.22B
EBITDA 33.55 (Ratio)
Enterprise Value 49.83B
EV/Revenue 6.62
EV/EBITDA 33.55

Revenue growth of 11.9% indicates steady, moderate expansion.

2.3 Management

Role Metric
Consensus Rating N/A

2.4 Return

Metric Value
Expected Return (Ann.)* 24.06%
Risk / Std Dev (Ann.)* 18.15%
1-Year Price Return* 20.53%

Latest Market Data (as of 2026-08-04, US Eastern time):

Metric Value
Last Price $209.70
52-Week Range $164.50 – $210.20
Observation Count 236 trading days

The return and risk statistics use daily adjusted closes from the retrieved one-year series and annualise daily moments using 252 trading days. The last price is the latest regular-market price reported for the stated date. Source: Yahoo Finance market data.

DuPont Model Analysis

The DuPont model decomposes return on equity (ROE) into three operating and capital-structure drivers:

ROE = Net Margin × Asset Turnover × Equity Multiplier

The comparison uses the latest two comparable annual periods available for the issuer, with reported statement amounts shown in US$. Revenue and net income are income-statement flows; total assets and shareholders’ equity are year-end balance-sheet figures. This is a simplified year-end-balance DuPont comparison rather than an average-balance ROE calculation.

DuPont component Calculation FY2026 FY2025
Revenue Reported revenue $7.53B $7.46B
Net income Reported net income $887.00M $1.12B
Total assets Year-end reported balance $13.13B $12.37B
Shareholders’ equity Year-end reported balance $6.76B $6.39B
Net margin Net income ÷ revenue 11.78% 15.02%
Asset turnover Revenue ÷ total assets 0.5735x 0.6034x
Equity multiplier Total assets ÷ shareholders’ equity 1.9413x 1.9367x
ROE Net margin × asset turnover × equity multiplier 13.11% 17.55%

Source: Yahoo Finance annual statements. Values are based on the two latest comparable annual periods returned by the source; fiscal period labels use the statement period-end year.

2.5 FCFF DCF Valuation

Valuation basis: This research model follows a five-year, unlevered FCFF DCF. It starts from reported annual operating inputs, forecasts revenue and operating cash conversion under an explicit mechanical policy, discounts FCFF at WACC, applies a Gordon-growth terminal value, and bridges enterprise value to an indicative common-equity value per share. It is an analytical estimate rather than a recommendation or personalised target price.

Step 1 — Forecast Operating Profit and NOPAT

Reported operating input Value
Revenue $7.53B
Prior annual revenue $7.46B
EBIT $1.23B
Tax rate 24.80%
NOPAT = EBIT × (1 − tax rate) $927.22M
Forecast start-growth basis 0.91%
Forecast policy latest reported annual revenue growth, bounded to -10.00% / 15.00%

Step 2 — Calculate FCFF

Current FCFF building block Value
NOPAT $927.22M
Add: depreciation & amortisation $323.00M
Less: capital expenditure -$230.00M
Less/(add): working-capital cash-flow movement $687.00M
Current unlevered FCFF $1.71B

Explicit FCFF forecast

Forecast year Revenue growth NOPAT D&A Capex Change in NWC FCFF Present value
1 0.91% $935.66M $325.94M -$232.10M $693.26M $1.72B $1.66B
2 1.31% $947.91M $330.21M -$258.90M $702.33M $1.72B $1.53B
3 1.71% $964.07M $335.84M -$287.49M $714.31M $1.73B $1.42B
4 2.10% $984.35M $342.90M -$318.22M $729.33M $1.74B $1.32B
5 2.50% $1.01B $351.47M -$351.47M $747.56M $1.76B $1.24B

Step 3 — Determine the Discount Rate (WACC)

WACC input Value
Risk-free rate 4.71%
Equity risk premium assumption 5.50%
Beta 0.64
Cost of equity 8.24%
Pre-tax cost of debt 3.03%
WACC 8.07%
WACC validation within standard range

Step 4 — Estimate Terminal Value

Terminal-value input Value
Perpetuity growth rate 2.50%
Terminal value $32.30B
Implied terminal EV / EBITDA 19.08x
Terminal value as % of enterprise value 75.33%

Step 5 — Discount Cash Flows to Enterprise Value

Enterprise-value component Value
Present value of explicit FCFF $7.17B
Present value of terminal value $21.91B
Indicated enterprise value $29.09B
Discounting convention mid-year for explicit FCFF; terminal value discounted at year-end five

Step 6 — Convert Enterprise Value to Equity Value

Equity bridge Value
Indicated enterprise value $29.09B
Less: gross interest-bearing debt $1.55B
Add: cash and equivalents $2.98B
Add: affiliate investments $0.00
Less: minority interests $0.00
Indicated common equity value $30.52B

Step 7 — Calculate Indicative Value Per Share

Per-share output Value
Shares used 253,000,000.00
Share-count basis reported diluted weighted-average shares
Current market price $209.70
DCF indicative value per share $120.62
Indicative value vs. market price -42.48%

Model Integrity Checks

Check Result
Perpetuity growth is below the risk-free rate pass
Perpetuity growth is below WACC pass
WACC is within the configured operating-company range pass
Terminal-year FCFF is positive pass
Terminal capex converges to D&A pass
Terminal-value concentration within review band
Implied price differs from spot by more than 30% review required

2.6 Investor-Style Research Screen

Educational screen Result
Buffett-inspired cash-quality checks 4/4 evidenced checks
Lynch-inspired balance-and-growth checks 4/4 evidenced checks

Data lineage: Yahoo Finance public market and reported-statement data; retrieval timestamp: 2026-08-18 17:31:06.225787 UTC; latest reported fiscal period: 2026-03-31 00:00:00. Default assumptions: five-year forecast, mid-year discounting for explicit FCFF, a maximum 2.50% perpetuity-growth rate below both WACC and the risk-free rate, historical operating-ratio persistence, and capex convergence to D&A by year five. No sell-side consensus or management guidance is substituted for reported inputs. This is research and analysis only, not personalized financial advice.

2.7 Quantitative Factor Diagnostics

Factor-model exception: No sufficiently aligned issuer-return and regional factor-return sample is available. No Fama–French loading or alpha estimate is published on an incomplete basis.

Factor models are descriptive in-sample exposure diagnostics, not forecasts, investment recommendations, or estimates of future returns. This is research and analysis only, not personalized financial advice.

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