Perfect World Co., Ltd (PWRD) has been setting new highs for months and with earnings keeping pace the trend should continue.

Company Description

Perfect World develops online gaming in China. The company specializes in huge multi-player games that drive revenue through either time spent playing or individual purchases. While a majority of cash flow is from China it also licenses its games in 11 other countries.

Profits Surge 55%

On Aug 10 Perfect World announced second-quarter results that included revenue of over $76 million. That level is up 56% on a year-over-year basis. Profits grew proportionally to $66.5 million.

Earnings per share came in at 78 cents, 28% higher than the Zacks Consensus Estimate of 61 cents.

Michael Chi, Chairman and CEO, said “Our strong results were primarily driven by better than anticipated performance of our newly launched 2.5D mysterious adventure MMORPG `Battle of the Immortals’ and increasingly optimistic results from a number of our existing games.”

Estimates Spike

The Zacks Consensus Estimate for full-year 2009 is now $2.84, up from $2.49 after 10 of 12 analysts raised estimates. Next year’s forecasts are averaging $3.37, up from $2.87.

These figures will yield annual growth rates of 59% and 19%, respectively.

Valuations

Despite the ever-climbing share price, the stock remains a decent value. Shares are exchanging hands at about 14 times forward earnings and the PEG ratio is just 0.6.

The Chart

Shares of PWRD have been setting new 52-week highs since June. On the bright side, earnings are keeping up, which is one reason to believe the trend will continue. Take a look at the chart below.

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