"Perfect World Company Ltd. (NASDAQ: PWRD), an online game developer and operator, is my top investment idea for 2010," says Alex Kolb, the growth & income analyst for Zacks.com.

""Chinese stocks have been on fire lately and Perfect World Co., Ltd. is no exception. And the company's fundamentals point to even stronger momentum in 2010.

"The company develops online games based on its game engines and game development platforms. Its games include massively multiplayer online role playing games ('MMORPGs') such as Perfect World, Legend of Martial Arts, Perfect World II, Battle of the Immortals and Fantasy Zhu Xian to name a few.

"Perfect World says that a substantial portion of the revenues are generated in China. However, its games have been licensed to leading game operators in a number of countries and regions in Asia, Europe and South America.

"The company also generates revenues from game operation in North America and plans to continue to explore new and innovative business models.

"Competitors like Shanda are also performing extremely well, an indicator that online role playing games are very popular and should continue attracting more players in 2010.

"PWRD shares have soared by more than 120% so far in 2009, surpassing the major averages by more than 100%. Despite the significant surge, the stock is attractively price with a forward P/E of 14.

"Perfect World’s fundamentals point to even stronger momentum in 2010. Analysts polled by Zacks currently have 2010 earnings pegged at $3.66 per share. The forecast is up from $3.45 over the past 2 months and compares favorably to the current 2009 Zacks Consensus estimate of $2.90.

"If history is any indication, earnings will exceed forecasts. Since 2007, Perfect World has consistently topped earnings expectations. Earnings surpassed estimates by an average of 31% over the past 4 consecutive quarters.

"The company is expected to see 33% earnings growth over the next 3 – 5 years, well above the industry’s expectation of 18% growth. Other strong industry comparisons include Perfect World’s return on equity (ROE) of 55.5%, versus the industry average of 2.5%.

"The company boasts a net profit margin of 47%, while the industry average is in the negative. It is also worth noting that Perfect World sports a solid balance sheet, showing no debt.

"The company saw robust results in the third quarter. Earnings per share of 81 cents came in 8% ahead of the Zacks Consensus Estimate. Total revenues jumped 13% year-over-year.

"Management mentioned that third-quarter results exceeded the company’s expectations, adding that Perfect World continues to strengthen its competitive advantages in the industry by strategically crafting a highly diversified portfolio of truly differentiated games.

"Recently, the company introduced a new 3D fantasy MMORPG, Forsaken World. Management explained that this game breaks new ground in terms of overall planning, programming and graphical designs."