Stillfront – Analysis


  • High return on assets
  • Low debt
  • Low cost of capital
  • High growth
  • Interesting technical formation

Stillfront became listed on the Swedish stock exchange First north in 2015. It is a gaming company comprising several gaming studios and specializes in strategy based games. Some of the games are Unravel, Siege: Titan Wars, Big Farm and Call of war.

Smaller gaming companies, like Stillfront, are not as well followed and don’t have as many institutional investors on board as bigger Gaming companies. Yet this little company has been growing profits by a very large percentage, for the last couple of years, at roughly 25-30 percent every year, depending on the key ratio used. But the valuation has not followed suit.

EV/EBIT is now at around 14 and the P/E around 25, which is Historically low. Cash plus inventory can pay off the entire long-term debt, which makes the company financially strong. Revenue has been increasing at a rate of above 50(!) percent yearly, for the last couple of years. High growth rates result in high multiples, so the PE of around 25 is not unwarranted high, given that. Taking a more conservative future outlook, that growth might slow down. It usually does. But an estimation of 20-25 percent yearly growth, for the coming five to ten years, might be a good estimation, since high growth usually tapers off a bit over time.

Technically, the stock has been going sideways for the last year or so. But during the last couple of months the price has been moving strongly to the upside, looking like it is emerging out of strong longer base as we can see in the picture below.

A technical price target of above 400 is not unlikely based on this picture.

Promising future of growing demand

The gaming industry has experienced rapid growth in the last decade. Stocks of leading U.S. based Video-game makers, like Activision Blizzard and Electronic arts, have been going strong in the last couple of years. Several factors contribute to this. One reason are expanding profitability from the growing sales of digitally delivered content. The Gamer community is growing as well. A survey from Nielsen Holdings showed that gamers above the age of 12 have increased from 58% to 66%, between 2013 and 2018.

The number of games have also increased overall, which increases the likelihood of people finding games suited to their specific needs. The growth of the Iphone and Ipad has spurred this growth and given rise to a new version of gamers. This is good news for Stillfront, who offer several mobile based games.

Since Stillfront has a majority of strategy based games, their customer base is solid. Gamers often invest a lot of time and effort in these games which makes them more reliable as future customers. The company therefore has a reliable income stream in place. And when they acquire, or develop, new games that often adds fast to the income and profits quickly pile up, since the company has a relatively low cost of capital. The business strategy is to grow through acquisitions and to create synergies between these different branches and gaming studios. A strategy that has been working well so far.

The company owns gaming studios operating in many segments, in for example mobile based games and browserbased games, giving the company a well-diversified portfolio. The studios are well-diversified geographically, spanning the United States, Europe and the Middle East. Stillfront also develops most of their games by their own which gives them the potential advantage of organic growth.


Overall Stillfront’s future looks promising and the growth may very well continue, taking the stock price higher. When I write this, in mid September 2019, the stock is trading around 240 sek. Although the stock has been going strong for the last six months and may pause for a bit here, I think it may very well continue higher into the future. Based on the technical data combined with continually growing profits, at around 25% yearly, I see a price target of at least 500 sek, and an intrinsic value of around 520, with a time horizon of about one to two years.

Update: As of December 21, 2020, I am now short this stock. After the big run up(which I did not buy) I believe Stillfront is now in for an intermediate to longer term correction, which is why I am shorting the stock.

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