Starbreeze has announced a partnership with Krafton, the South Korean gaming giant behind PUBG. Krafton, a major player in the free-to-play market, reported a record-breaking USD1.4b in revenue in 2023, with USD460m—about one-third—coming from PC and console platforms. PUBG: Battlegrounds consistently attracts close to 800,000 daily players on Steam, making this partnership highly favorable for both the franchise and Starbreeze, according to Redeye.

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* Industry's 10-year median ROIC is below 15%, indicating potentially lower long-term returns.
* Signs of weakening competitive advantage may lead to declining profit margins and cash flows.
* Lack of diversified revenue base increases vulnerability to market fluctuations and potential revenue loss.
* Products do not significantly contribute to the greater good, potentially limiting appeal to ethically-conscious investors.

* Strong recurring revenue model enhances business stability and predictability, making scaling easier.
* Asset-light business model allows for efficient scaling without costly reinvestment, enabling faster expansion and better cash generation.
* Partnership with Krafton for PUBG positions the company to capture significant value in the gaming market.

* Gross Profit Margin and Operating Margin (EBIT) are below the desired thresholds, indicating potential profitability challenges.
* Return on Equity (ROE) has not consistently reached 20% over the last five years, suggesting inefficient use of shareholder capital.
* Stock price has not compounded by at least 10% since IPO, indicating underperformance in long-term investor returns.
* Earnings (EPS) growth has been inconsistent and below the desired 10% threshold over the last five years.

* Revenue growth has consistently outperformed the industry average over the last five years, suggesting market share gains and competitive strength.
* Current assets are 1.5 times greater than current liabilities, demonstrating strong short-term liquidity and financial health.
* Net Debt is less than two times Operating Cash Flow, indicating a favorable debt repayment capacity using operating cash flow.
* Cash and short-term investments cover expected cash burn for more than two years, signaling market resilience and reduced need for immediate fundraising.

* Short tenure of senior team and CEO, with CEO lacking extensive business experience
* Inconsistent delivery on promises and poor track record of value creation
* Increase in share count without corresponding EPS growth, indicating potential dilution
* Low insider ownership and lack of significant stakes held by board members and management

* Clear strategic plan focused on creating value and commitment to innovation
* Incentives aligned with long-term shareholder value
* Presence of a controlling owner with long-term commitment and promotion of female representation in leadership