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King Digital's Doubters Are Wrong

NEW YORK (TheStreet) -- You've heard it, all the negative publicity over King Digital Entertainment's initial public offering.

One-hit wonder. What the hell is Candy Crush Saga?

Well, when you stop carping and actually look at the company's F-1 IPO filing, you see a healthy business model.

I'm not saying I'm buying shares of the stock on Day 1 Wednesday when it starts trading under the ticker symbol of "KING," but the assumption -- yes, mine, too -- was that King was a joke of an IPO. But is it?

In the F-1 filing, you'll see that King had annual 2013 revenue of $1.88 billion. This dwarfs 2012's revenue figure of just $165 million, and actually isn't all that far from the $3.8 billion in revenue Electronic Art's (EA) had in 2013. At least when you consider how long each company has been established. 

Furthermore, King has been cash flow-positive since 2005, currently has no debt and has $408 million in cash. 

In 2013, earnings before interest, taxes, depreciation and amortization and adjusted margins also rang in at an impressive 44%, while the company earned $4.65 per share for the year. 

So by all accounts, this company actually has some sexy metrics and by most standards could have a reasonable valuation for its current performance, pending on the opening price of the stock. 

WATCH: King Digital IPO Has Investors Waiting to Taste Candy Crush

King Digital is looking to price between $21 to $24, giving the company a valuation of roughly $7.5 billion. In comparison, Electronic Arts currently has a market cap of roughly $9 billion, Activision Blizzard (ATVI) has a market cap of $14.6 billion and Take-Two Interactive Software (TTWO) has a market cap of $2.1 billion. 

Despite the high margins, solid free-cash flow, no debt, plenty of cash and high revenue growth, there lies one problem with this stock: Candy Crush Saga

The game accounted for 78% of the company's total gross bookings. An additional 17% of total gross bookings came from just two other games (Pet Rescue Saga and Farm Heroes Saga). In all, 95% of the company's total gross bookings are comprised of three games. 

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