As I wrote last week, I was expecting that Paradox might be down after their quarterly earnings release as the large amount of retail investors in this stock don't understand the cyclicality of the sales. As such I only opened half a position based on the bullish sales trend of Tyranny last week.

Sales January - September 2016 ended up at SEK455m. That is SEK606m annualized (better than FY2015) and thus puts P/S at 9, which is very high for the sector. Tyranny, which has been in the Steam Top-1 global best sellers list since November 8, is not included in these numbers so I think FY2016 might improve a bit, thus getting P/S to a lower and more comfortable level.

But I am cautious because the first 9 months of 2016 did include Stellaris and Hears of Iron IV. Simplistically, to grow even further in 2017 (which they have to at this valuation) they need to somehow have 2 full priced releases which outsell those two games.

Sales were 5% lower for 9 months, but profits margins increase from 41% to 49% as more games were developed in-house. Profit after tax for the 9 months was SEK172m (an increase of 12%). Profit per share was 1.63, which annualized is 2.17, putting PE at 23 - which is definitely not cheap, but worth a small position given the current sales trends of their games.

Given that Paradox overall is still quite expensive it will remain the smallest position overall in my portfolio for now.