Shuffle Master (Nasdaq:SHFL) started off providing casino operators with card shuffling systems and related products, to help them operate games more efficiently. The company has evolved into selling gaming systems to the same customer base. The concept is performing well, but puts Shuffle Master more directly in competition with larger industry players. Given the higher valuation, prospective investors may want to watch the action from the sidelines.

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Full Year Recap
Sales for Shuffle Master advanced 12.9% to $227.8 million. The largest segment at 36.4% of total sales is called Utility and provides card shuffling equipment and other products that "enhance table game speed, productivity, profitability and security" for casino clients, such as MGM Resorts International (NYSE:MGM); it reported solid growth of 7.2%. The other three segments sell an array of games for table and electronic casino games. Electronic gaming machine sales jumped 62.7% to $66.9 billion, or nearly 30% of total sales, on continued popularity of its Equinox cabinet, which houses PC-based slot machine games in Australia. Proprietary table games advanced 8.8% to make up nearly 20% of sales and benefited from the firm's three card poker and Pai Gow poker offerings. The only segment to struggle was electronic table systems, which reported a 20% sales decline to account for the remaining 15% of total sales.

Cost controls helped push up operating income by 31.1% to $46.3 million. Lower interest expenses contributed in a net income increase of 36.8% to $31.6 million, or 57 cents per diluted share. The company did not provide year-end balance sheet or cash flow information in its press release. (To know more about income statements, read Understanding The Income Statement.)

Analysts currently project 8.7% sales growth for the coming year and total sales just north of $247.51 million. The current profit projection is 70 cents per share for year-over-year growth of approximately 23%.

The Bottom Line
Management did detail growth in fourth quarter free cash flow generation and that it was able to lower total debt by $39.2 million for a net debt position of only $17.1 million as of year end. It's posting decent sales growth and profit growth does look to be improving. Unfortunately, a strong stock rally after the solid full-year results has pushed the forward P/E back above 13. This combined with the fact that Shuffle Master is now directly competing with larger firms including International Game Technology (NYSE:IGT), Bally Technologies (NYSE:BYI) and WMS Industries (NYSE:WMS), could make future share price gains more of an uphill battle for shareholders. (For additional reading, check out 5 Must-Have Metrics For Value Investors.)

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At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.