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Anand Chokkavelu, CFA

GameStop has a P/E ratio of 9.0 and an EV/FCF ratio of 6.7 over the trailing 12 months. If we stretch and compare current valuations to the five-year averages for earnings and free cash flow, GameStop has a P/E ratio of 11.0 and a five-year EV/FCF ratio of 8.7.

Source: Capital IQ, a division of Standard & Poor's.

In the past five years, GameStop's net income margin has ranged from 3.1% to 4.5%. In that same time frame, unlevered free cash flow margin has ranged from 3.7% to 5.7%. 

Next, let's figure out ...

Let's start by seeing what this company's done over the past five years. In that time period, GameStop has put up past EPS growth rates of 29.8%. Meanwhile, Wall Street's analysts expect future growth rates of 11.8%. 

The pile of numbers we've plowed through has shown us the price multiples shares of GameStop are trading at, the volatility of its operational performance, and what kind of growth profile it has -- both on an absolute and a relative basis.

The more consistent a company's performance has been and the more growth we can expect, the more we should be willing to pay. We've gone well beyond looking at a 9.0 P/E ratio, and all the initial numbers look good. But be careful. GameStop's future growth may not live up to analysts' rosy expectations. A bricks-and-mortar video game business is a tough business to be in. If you find GameStop's numbers or story compelling, don't stop. Continue your due diligence process until you're confident one way or the other. As a start, add it to My Watchlist to find all of our Foolish analysis.

Anand Chokkavelu owns shares of Best Buy. The Motley Fool owns shares of Wal-Mart Stores, Best Buy, and GameStop. Motley Fool newsletter services have recommended buying shares of Wal-Mart Stores, Amazon.com, and Best Buy. Motley Fool newsletter services have recommended creating a diagonal call position in Wal-Mart Stores and writing covered calls in GameStop. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. 

How Cheap Is GameStop's Stock by the Numbers? @themotleyfool #stocks $WMT, $BBY, $AMZN, $GME