NEW YORK (CNN/Money) - Video-game publishers Electronic Arts, Take-Two Interactive and Activision are members of a pretty exclusive club -- their shares are actually up since the Nasdaq peaked on March 10, 2000. Another publisher, THQ, has lost just 4.5 percent since then.

But recently the group has drastically underperformed the market. While the Nasdaq is trading 20 percent above its Oct. 9 low, the four major video game stocks have fallen an average of 23 percent.

So, is that it for the group?

Paul Kaump, an analyst with Dougherty & Co., thinks there's the potential for another run, thinking sales and earnings growth should accelerate at the end of this year and be strong next year as well.

Kaump said game-software sales are strongest not when new consoles come out but once prices are low enough to spur mass adoption. Sony and Microsoft already have cut the prices of PlayStation2 and Xbox, respectively, from $299 to $199, fueling software sales. And Nintendo has cut the price of its GameCube from $199 to $149.

Time to play a game? Valuations are reasonable for the four major software developers and a video game retailer. Company  P/E  LT EPS Gr. Rate  Activision  21.0  20%  Electronic Arts  19.2  20%  Electronics Boutique  9.4  20%  Take-Two Interactive  8.9  20%  THQ  15.4  15%   * based on prices and estimates as of 3/14/03  Source:  First Call

Kaump expects more cuts, and does not expect Sony or Microsoft to come out with new consoles until 2005 at the earliest, with a launch in 2006 more likely.

Without a price cut, though, there are concerns about growth for the video game software publishers, said Walter Prendergast, manager of the WPG Tudor fund, which owns shares of Take-Two Interactive. With Iraq war fears and rising unemployment, the average consumer who doesn't own a video game console might not feel compelled to buy one until prices come down.

That's why Prendergast said he is not looking to invest in any more video game software companies, even though he likes their long-term prospects. "It just comes down to where consumer discretionary spending will go," he said. "I'm waiting for a catalyst that will improve consumer spending before committing more funds to these companies."

Kaump said he likes Electronic Arts (ERTS: Research, Estimates) and Take-Two Interactive (TTWO: Research, Estimates) right now because they have taken the strategy of producing games mainly for Sony, which has proven to be the most popular hardware platform. Kaump does not own either stock. His firm has no investment banking relationship with the companies.

In addition, their top games are geared toward older users (that is, those in their 20s and 30s), who have been the main buyers. For example, Electronic Arts churns out updated versions of its popular sports games like "Madden NFL" and "NBA Live" every year. And Take-Two has a monstrous hit on its hands with its "Grand Theft Auto" series of games.

"Companies with alluring content that is geared toward more mature customers are performing better," Kaump said.

More about video games: Game Over by Chris Morris Doom 3 and half-naked fairies Electronic Arts' online folly Grand Theft Auto pays for Take-Two Sony's cash machine

Valuations are attractive as well. Electronic Arts trades at 19 times earnings for its next fiscal year (ending in March 2004) and earnings are expected to increase 17 percent. Take-Two is trading at only 9 times earnings estimates for this fiscal year (which ends in October) even though earnings are expected to increase 25 percent.

Activision's and THQ's short-term prospects are dimmer though. Kaump said Activision has been stumbling, with some of its extreme sports games failing to live up to expectations -- Activision issued an earnings warning in December.

Even though Activision (ATVI: Research, Estimates) is trading at a reasonable multiple of 21 times next fiscal year's earnings estimates, Kaump said it is not a good bet for the short-term since earnings are expected to decline 23 percent next year.

As for THQ (THQI: Research, Estimates), Prendergast said the company made a mistake by not aligning itself with Sony as closely as EA and Take Two did. "THQ supported Xbox and GameCube a little too much," he said.

THQ trades at 16 times earnings estimates for next fiscal year (ending in March 2004). Earnings are expected to increase by 65 percent, but estimates have been reduced drastically for both this fiscal year and next during the past few months.

But Kaump said perhaps the best way to invest in the video game market is through retailer Electronics Boutique (ELBO: Research, Estimates), since it should benefit as long as sales are strong for the industry, regardless of who the individual software winners are. The company reported better-than-expected earnings last week. "Electronics Boutique is positioned well. It's a way to play gaming overall instead of betting on individual publishers," Kaump said.