Game on at Game Digital

True, in a previous incarnation, Game overreached itself and went into administration in early 2012. It was relisted as Game Digital last summer and management spent the intervening time exiting underperforming territories and more than halving the group's store base to around 600. It has also revamped the business to foster loyalty among today's gamers and fend off fierce competition from Amazon and others. For example, Game offers exclusive versions of games and has begun accepting trade-ins of smartphones and tablets. More than 450,000 customers in the UK and Spain use its Game Wallet e-payment system to store reward points, gift cards, trade-in credit and cash.

Game offers exposure to two major industry trends: digital distribution, or selling games and content online, and 'eSports' - watching others play video games. The group's mobile games store, downloadable content for Microsoft's Xbox One console and other online offerings drove digital revenue up 40 per cent in the six months to 24 January. And it recently acquired Multiplay, which organises major gaming festivals that are watched online by millions; it also offers server hosting and other services to games publishers. The deal should pay off handsomely in time: eSports audiences tripled in size to an estimated 205m viewers in 2014, and more than 100m spectators log on to Twitch, the most popular video-game streaming platform, every month.

Other factors should buoy Game Digital this year. Management has highlighted a robust slate of video game launches, including Halo 5, Star Wars Battlefront and the latest versions of Fifa, Call of Duty and Assassin's Creed. And, unlike last holiday season, aggressive discounting of the Xbox One and Sony's PlayStation 4 consoles shouldn't be a major problem. Several price cuts have eroded profit margins on those consoles over the past two years, which should discourage further undercutting. Spending should be more focused on games, which boast gross margins of around 29 per cent compared with 2.4 per cent for hardware. And the group could receive a further boost from the launch of a new Nintendo console in 2016; the previous Nintendo Wii sold 100m units worldwide.

Analysts at broker Liberum expect a 46 per cent rise in sales of new games and digital content to offset lower hardware sales over the three years to July 2017. They predict that will widen the group's operating margin by more than a third to 5.8 per cent, and generate average annual EPS growth of 14 per cent. Yet, despite Game Digital's revitalised growth prospects, its shares trade at just 12 times next year's forecast earnings. There's also that prospective yield of 6.3 per cent.