Electronic Arts (NASDAQ:EA) released its full-year 2021 earnings on May 11, delivering another year of solid growth for the gaming conglomerate. The company continues to delight shareholders by growing its top line through its long-standing franchises and up-and-coming games, while also acquiring new studios and returning cash to shareholders. Here are four reasons to buy Electronic Arts after its latest earnings report.

1. Growth of Apex Legends

In the recent quarter, free-to-play battle royale game and Fortnite competitor Apex Legends hit $1 billion in lifetime bookings since its launch in 2019. CFO Blake Jorgenson mentioned that bookings (the equivalent of revenue in the gaming industry) doubled over the past 12 months, which shows the high growth the franchise is bringing to EA's business.

A kid playing a game on his smartphone and smiling.

Image source: Getty Images.

The free-to-play game now has over 100 million players, just launched on the Nintendo Switch, and has a mobile version coming out of beta testing soon. While most of EA's franchises are low-growth, steady cash generators like FIFA, Madden NFL, and The Sims, Apex Legends is growing at a rapid pace and shows no signs of slowing down anytime soon.

2. Recent acquisitions

EA has made two recent acquisitions. One was the purchase of U.K. studio Codemasters for $1.2 billion. Codemasters owns racing titles like Dirt and Grid, but most importantly, it brings the Formula One franchise under EA's roof. F1 will likely not be a blockbuster franchise as the sport is not as popular as soccer or football worldwide, but it should generate a steady stream of cash each year while also giving EA Sports the potential to expand its esports and mobile capabilities.

The second acquisition was Glu Mobile for $2.1 billion. The mobile-focused studio generates over $500 million in annual bookings, so the acquisition looks like it was made at a reasonable valuation. Plus, it brings over 500 mobile game developers under EA's umbrella.

Historically, EA has struggled with the mobile market. It made up only 12.6% of bookings over the last 12 months, even though it makes up 50% of the overall gaming market. If EA can leverage Glu's expertise, the company's mobile segment could grow substantially over the next few years through Glu's franchises and a revamp of EA's existing mobile titles.

3. Returning cash to shareholders

Over the last year, EA repurchased 5.6 million shares of its stock, bringing the total share count down to an estimated 287.6 million. The company has a strong history of reducing its shares outstanding (and therefore increasing the earnings attributed to remaining shareholders) as a way of returning cash to investors. Its share count has steadily come down since 2012, where it stood at 331 million, to below 288 million today.

EA has also started paying a $0.17 quarterly dividend on top of its consistent buyback program. The yield is small, at about 0.5%, but with $4.5 billion in net cash (cash minus debt) and almost $2 billion in annual cash flow, EA has a clear path to grow its dividend in conjunction with its buyback program over the next decade.

4. Reasonable valuation

EA has a market cap just north of $40 billion. But if you take out the $4.5 billion in net cash -- which it won't need to fund operations -- that comes down to around $36 billion. Guidance for the next fiscal year is for $1.75 billion in operating cash flow, meaning that currently, EA's stock trades at a price-to-operating cash flow (P/OCF) of 20.5. This is not dirt cheap, but totally reasonable if you believe EA can consistently grow its business while also returning cash to shareholders through buybacks and dividends.

Overall, there are a lot of reasons to like Electronic Arts prospects over the next decade. It has a high-growth franchise in Apex Legends, has acquired some great assets from Codemasters and Glu Mobile, and should continue to repurchase stock and pay a dividend. For these reasons and more, EA stock looks like a buy after its latest earnings report.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.