Is it truly "Game Over!" for GameStop (NYSE:GME)?

Watching the stock tumble 16% in the wake of third-quarter earnings, it's apparent that Wall Street thinks so -- and it's no mystery why. Lulled into complacency by the company's record of posting quarter after quarter of gangbusters growth, investors (including yours Fool-y) were surprised to see sales growth drop into the single digits Wednesday, and profits drop ... period.

And yet, GameStop still managed to move $1.7 billion in box-sized virtual entertainment sales last quarter. While profits fell 10% on a GAAP basis (to $0.28 per share), they appear to have exceeded by a penny Wall Street's estimate of $0.37, pro forma. (Pro forma, in this case, means what profits would have been if GameStop had incurred no "merger-related costs, foreign currency fluctuations, and debt extinguishment expenses.")

Considering that the year-ago numbers were inflated by sales of the then-just-released Halo 3 for Microsoft's (NASDAQ:MSFT) Xbox, and that we're in the middle of a recession that Goldman Sachs is calling the worst since the Great Depression, and barreling toward what Wachovia predicts will be 9% nationwide unemployment … well, perhaps a little bit of weakness shouldn't have come as a surprise.

The real surprise, to my mind, is that business remains as brisk as it is. Software giants Electronic Arts (NASDAQ:ERTS) and Activision Blizzard (NASDAQ:ATVI) are still churning out new titles, and GameStop management believes it will still end this year with sales up more than 20% year over year, and profits up a robust 30% or better.

The real surprise is that Wall Street thinks performance like this is worth a measly 7.1 times projected earnings (of $2.45). For a 20% grower, that's just insane. For a 20% grower in a recession -- well, I'm flummoxed. I just don't know what word can describe the level of past-insanity implied by GameStop's current valuation.

Honestly, the only word that comes to mind is: "Buy."

But do the master investors at Motley Fool Stock Advisor agree? Take a free 30-day trial and find out.

Stock news, financial commentary, and your daily dose of Foolishness: Get plugged in to The Motley Fool on Twitter!

Fool contributor Rich Smith does not own shares of any company named above. Why do we tell you this? Because The Motley Fool has a disclosure policy.

Microsoft is a Motley Fool Inside Value pick. GameStop, Electronic Arts, and Activision Blizzard are Motley Fool Stock Advisor picks.