MSGM

We rate Motorsport Games Inc. (MSGM) as a Hold with a composite score of 62.1/100 at a current price of $3.60. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in quality (79th percentile) and value (77th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (23th percentile) and stability (40th percentile) tempers our overall conviction. We assign a Wide Moat rating (70/100), Low uncertainty, and Exemplary capital allocation.

Key items to watch: sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Motorsport Games Inc. holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 62.1/100 places it at rank #496 in our full 7,333-stock universe. At $16M in market capitalization, Motorsport Games Inc. is a small-cap player in the Services space, which limits certain scale advantages but may allow for more agile strategic execution.

The near-term outlook is constructive, with revenue growing at 65% and momentum in the 76th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 23th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 74% (+14.7pp vs sector) narrow to operating margins of -3% (-6.2pp vs sector) and net margins of 53.7%, yielding a gross-to-net conversion rate of 72%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $3.60, Motorsport Games Inc. appears undervalued relative to its fundamentals. Our value factor score of 77/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 3.0x (a 87% discount to the sector median of 23.7x), EV/EBITDA of 3.1x (discounted to peers), P/B of 2.4x, P/S of 1.8x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Low uncertainty rating to Motorsport Games Inc.. The company exhibits strong financial stability with a beta of 0.53, conservative leverage (49% D/E), and a stability factor in the 40th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: low beta of 0.53 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 40th percentile and quality factor at the 79th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 74% provide a buffer against cost pressures. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Motorsport Games Inc.'s capital allocation as Exemplary. Management demonstrates a strong track record of balancing reinvestment with shareholder returns, evidenced by returns on equity of 80.3%, disciplined leverage (49% D/E), best-in-class net margins of 53.7%. Exemplary allocators typically generate returns on equity above 20% while maintaining debt-to-equity below 50% — Motorsport Games Inc. meets this high bar.

The balance sheet remains conservatively managed, providing financial flexibility for opportunistic investments while maintaining a margin of safety for shareholders. We note that the combination of 54.0% return on assets and controlled leverage suggests management is deploying capital at rates well above the cost of capital — the hallmark of exemplary stewardship.

In summary, Motorsport Games Inc. receives a Hold rating with a composite score of 62.1/100 (rank #496 of 7,333). Our quantitative framework assigns a Wide Moat (70/100, trend: stable), Low uncertainty, and Exemplary capital allocation. The average factor score across quality, value, momentum, stability, and investment is 59/100.

Our analysis supports a neutral stance on Motorsport Games Inc.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.