Changyou.com (NASDAQ:CYOU)

Looking at past growth at >25% for last 5 years (a sign the company has been on the right track) and projected growth at 10% for next 5 years, then a multiple PE of <6 is ridiculous, unless an extremely high risk is considered. Given the strong balance and steady increase of results so far, I think the shares are grossly undervalued.

The Chinese gaming companies have several things in common:

- They operate in a market that is growing at a rapid rate which offers great potential to all of them.

- Their valuations are ridiculous. After substracting net cash from their market caps the results are p/e ratios of 6 or lower across the board.

- They are cash machines. They don't require a lot of assets and the running games are providing them with lots and lots of cash to pay (special) dividends and buy back shares.

This sounds very attractive to me. Now most people are hesitant when it comes to Chinese companies. First of all because there is the potential for fraud. However while you can manipulate earnings and books you cannot manipulate the hard cash that is being paid out to shareholders by these companies again and again. In my opinion this is enough evidence to prove that those are legitimate companies.
Secondly people worry about the competition. Gaming companies have to constantly reinvent themselves and bring out new games or they will be left behind. If they dont succeed in attracting new players they have a problem. That is why I would recommend buying more than one of them to get some diversification to protect your portfolio against the risk of failure of one single company. The risk of new companies taking market share is minor, because it takes time, brand recognition and money to get into this market and new promising firms are likely to be taken over by one of the established ones.

I think this is a huge opportunity for savy investors and if you know the Graham/Buffet definition of risk you know that these companies are all but risky, because the margin of safety is probably the biggest I have ever seen.

I'm long CYOU NTES and GA.

I have been to China (Shanghai) a number of times over the last seven years and all the young people have great cell phones and are constantly playing games. As they continue to get more prosperous I believe this will be a great and fast growing market.

A chinese stock that is a gambling company on the internet will be rolling in it if this is all on the up and up. Glamblers never seem to remember the house always wins.

Social gaming has shown good growth in China and gives all indications of continuing. Changyou has shown capability to profit from the trend and with reasonable pipeline, do not expect it to end. Low cost luxury item for growing young middle class.

Positive:
- Strong growth combined with cheap valuation
- Subtracting cash their trailing PE is 3.2
- Q2 results were better than expected
- Does not depend to much on the direction of the general economy in China
- Not expensive despite the recent runup

Negative:
- Main risk: it is a Chinese company, fraud to enrich insiders could happen any time, but the recently announced one-time dividend of $3.80 seems to point the over way

Category: YEOTp

This might actually rate the $40+ price it was trading at for a short time.

One of the only real "Games in Town!"

beat numbers chinas gaming market i'm very bullish on.

With rising revenues and earnings quarter of quarter and a growing middle class in China for which to appeal to, CYOU is headed in a great direction. It's MMORPG subscription models gives the comapny constant revenues much like WoW does for ATVI which takes care of one of the deficiencies of the gaming industry (only gaining revenue from the initial purchase). It doesn't hurt that they are backed by Sohu either. I'll be investing in this company soon.

China accounts for 21% of all Internet users in the world. The great news is that only about 30% of China's population have access to the Internet. Watch both of these numbers go up significantly in the next 5-10 years. This company has a great balance sheet. They also have tons of cash on hand that will cover their current liabilities by three fold. Their earnings increased every quarter for past 4 years when compared to the same quarter previous year. Both fundamental and technical analysis reveal bullish signs. This is a great stock for a long term.

Games + China + Low P/E ==> Winning. Duh

ADRsPEROE10

I don't see how people are missing the potential. Do we despise China that much? P/E <5 with major hits in the pipeline? I also like GAME for this reason. WAY Undervalued. You can keep your ATVI.

CYOU has good growth potential and is currently a great value, with low EV to earnings raiton, plenty of cash and no debt. (3/31/2010). Price has pulled back significantly and this is an excellent time to buy a company with strong growth at a good valuation.

Solid management team; unique player in chinese online game sector;

Mark my words, a few years from now CYOU will be called "the next BIDU"...Less than a year old the subscription gaming division of SOHU is flush with cash, has no debt, and while they missed estimates last quarter they have significantly expanded their subscriber base (which takes 3-6 months to see $).

The online gaming market is exploding in China and around the world. This company is well-positioned in this business with a lot of cash, no debt, and a very low PEG ratio.

momentum swing pulls this higher over the next few months to a year