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.

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

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.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

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

Related Articles
  1. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  2. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  3. Investing

    Playing The Decline of Traditional Broadcast Media

    Broadcast media is losing viewership as cord cutting by the younger generation triggers subscription losses at cable and satellite companies.
  4. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  5. Wealth Management

    Importance of Title in Art Transactions

    A work of art can be a valuable investment, but it’s important to verify that it isn’t stolen property when you purchase it.
  6. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  7. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  8. Investing News

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  9. Stock Analysis

    Home Depot: Can its Shares Continue Climbing?

    Home Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
  10. Stock Analysis

    Yelp: Can it Regain its Losses in 2016? (YELP)

    Yelp investors have had reason to be happy recently. Will the good spirits last?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center