SHFL Entertainment, An Encouraging Play in the Gaming Industry

SHFL Entertainment, An Encouraging Play in the Gaming IndustryThe gaming industry has been the focus of many investors since 2008, primarily due to the collapse of the real estate market in Las Vegas, and the drop in consumer spending. Today we look at SHFL entertainment Inc (NASDAQ:SHFL), a company that manufactures and distributes gaming devices, and operates inter-casino linked systems and slot routes.  In our opinion, it has shown several signs of improvement.

We will discuss the fundamentals that could be encouraging in the long run. We will also discuss the valuation of the company’s competitors WMS Industries Inc. (NYSE:WMS), and Bally Technologies Inc. (NYSE:BYI).

Valuation

SHFL Entertainment stock trades at $15 versus its 52-week range of $8.69-$18.77, a P/E multiple of 21x, and a forward P/E of 18x. More importantly, the stock is trading at a discount to its long-term historical average of 28x. The company’s competitor WMS Industries trades at a P/E multiple of 13x, and a forward P/E of 12x.  Bally’s Technologies stock trades at a P/E of 15x, and a forward P/E of 13x.

Encouraging trends for Shuffle Entertainment:

1. The company has a strong balance sheet with cash of $28 million, and long- term debt of $16 million. Additionally, the company is free cash flow positive, which leaves room for a possible dividend in the future
2. The new Deckmate 2 shuffler, which is expected to be much faster, adds to the product line and revenue base going forward
3. In June, 2012, the company dropped plans to acquire Ongame Network, due to the decline in business conditions in Europe. This action encourages us to think that preservation of liquidity, and better deployment of capital is a priority for the company
4. Continued economic weakness in municipalities might mean legalization of gaming facilities

Risk related to investing in Shuffle Entertainment remain the following:

1. Increased competition in the specialty table game market
2. A weak macro environment, which might mean less disposable income in the hands of consumers
3. Continued expenses related to patent litigation

The chart below compares share performance over the past year. “E”s mark earnings reports.

SHFL Entertainment, An Encouraging Play in the Gaming Industry

Conclusion: The valuation looks attractive, and management has become very disciplined with the company’s balance sheet. Also, there are several encouraging trends in the market to make the Shuffle Entertainment stock an investment consideration for your radar screen.

For those of you looking for additional investment ideas in the gaming industry, take a look at our recent report.

This article was originally written by Sabina Bhatia, and posted on Kapitall.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!