Shares of
Multimedia Games Holding Company, Inc.
(
MGAM
) are rising on the back of impressive second-quarter results,
announced May 3, 2012. This casino-based gaming solutions provider
has a Zacks #1 Rank (Strong Buy).
Currently, the stock is trading around its 52-week high. There is
also a potential for further upside based on Multimedia's solid
growth projection for fiscal 2012.
Q2 Results Crush Estimates
Multimedia Games reported fiscal second quarter 2012 earnings per
share of 24 cents, beating the Zacks Consensus Estimate by a
massive 166.67%. Net sales jumped 31.2% over last year to $39.5
million, topping the Zacks Consensus Estimate of $36.0 million.
The company's largest segment (Gaming Operations) grew 24.0% year
over year, backed by success in the domestic markets and an
increase in the average installed base. Revenue for the gaming
equipment and system sales segment increased 57.4% while Other
revenue grew 36.4% year over year.
Gross margin improved 270 bps from the year-ago quarter to 83.9%.
The operating margin increased significantly to 16.9% from 4.5%.
Higher selling, general and administrative expenses were offset by
reduced amortization and depreciation expenses.
Guidance Upbeat
Multimedia Games expects fiscal 2012 total revenue in the range of
$144 million to $147 million, up from $127.9 million recorded in
fiscal 2011. Expectations for growth in new unit sales led the
company to raise its fiscal 2012 earnings guidance. Multimedia now
expects diluted EPS between 72 cents and 76 cents, compared with
its previously expected range of 42 cents to 45 cents.
Following the earnings release, the Zacks Consensus Estimate for
the fiscal third quarter increased 80.0% to 18 cents, while the
estimate for fiscal 2012 shot up 65.2% to 76 cents.
Valuation Looks Attractive
Shares of Multimedia Games were up 88.0% in the past 6 months,
compared with a 3.5% decrease for the S&P 500.
The company is expected to grow 25.0% over the next 5 years,
compared to a 17.8% growth rate for the industry. However, the PEG
of 0.8 is comparable to the 0.7 for the industry, indicating upside
potential.
Multimedia Games has traded at a premium to rivals Bally
Technologies Inc. (
BYI
), International Game Technology (
IGT
), Video Gaming Technologies, Inc. and WMS Industries Inc. (
WMS
).
The significant increase in the stock price in recent months was on
account of the encouraging sales trend and continued development of
new games. The stock is currently above its 50 and 200-day moving
averages of 13.53 and 11.23, respectively.
Trading volumes are considerably lower than its peers.
Founded in 1991, Texas-based Multimedia Games Holding Co. is one of
the most renowned providers of gaming machines, video lottery
terminals, and associated systems and equipment. Multimedia
provides Native American tribes and international lottery markets
with casino gaming technology.
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(
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MULTIMEDIA GAME (MGAM): Free Stock Analysis
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MULTIMEDIA GAME (MGAM): Free Stock Analysis
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