The Boutique bills itself as the gamers' store, with its service and stock geared toward gaming aficionados. Its stores offer the gamut of consoles, from PlayStations to GameCubes, as well PC entertainment accessories and all varieties of video games.
Electronics Boutique got its start from a bitty kiosk in a mall in King of Prussia, Pa., selling digital watches and calculators. The growth-minded gaming giant now has more than 950 stores spread across the globe, plus a full-service Web site.
Revenues have risen steadily over the past four years, and the business isn't likely to slow down anytime soon, says Robert Sullivan, manager of Satuit Capital Micro Cap fund. Demographics are in Electronic Boutique's favor, and since Xboxes recently dropped into the more affordable $199 price range, sales should be stronger than ever. What's more, Sullivan reasons, customers that buy the Xbox are going to buy games too.
Sullivan's fund looks for companies with above-average profit growth, clean balance sheets and rising cash flow. To date, the Boutique fits the bill: It has no debt and analysts polled by Thomson Financial/First Call expect earnings to grow at a 25% clip over the next three to five years. The company also has $3 per share in cash on the books. Yet with a price-to-earnings-growth ratio of just 0.6, the stock is fairly valued.
