Gamestop’s closest U.S. comparable is Best Buy (BBY).  Analysts for Best Buy Inc. are predicting an 8% year over year EPS growth rate.  Based on current trading prices, BBY trades at a P/E ratio of around 13.

Meanwhile, analysts project a 14% year over year EPS increase at Gamestop Inc (NYSE:GME).  With higher analyst growth expectations, one would expect GME to have a higher P/E ratio than BBY, right?  Wrong.  Gamestop, with also less debt relative to its market cap than Best Buy, trades at a P/E of less than 10, reflecting a belief from analysts (and even some industry executives) that Gamestop growth is doomed.

There are two main reasons for this belief – but they are not actually reasons, they are theories.  Theory #1 is that competitors will start biting into GME’s used game business.  Theory #2 is the more popular idea, that digital distribution will start cutting significantly into the retail business.  None of this has actually happened.  They are theories.  Yet, Gamestop trades as if they are facts.

The used game competition theory has already proven to be questionable with retailers like Best Buy and Wal-Mart (WMT) making passive deals with third parties to make room for used game trade machines that are supposed to market themselves to game traders.  Amazon and others have jumped in with me-too concepts and Gamestop has seen little impact, because Gamestop’s approach to used games is in no way passive.  The fact of the matter is no other retailer besides Blockbuster is really equipped to compete in a meaningful way due to store size, and meanwhile Blockbuster is closing down stores.

But Gamestop is the next Blockbuster,…