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Tickers in this Article: SHFL, IGT, BYI, LVS, WYNN, BYD
Shuffle Master (NYSE:SHFL) exists to help casinos run more efficiently and offer table and electronic games that gamblers will demand. Its basic shuffling devices sold well during its third quarter, as did a new PC-based slot machine game. With any luck, the solid sales trends will translate into steady profit growth going forward.

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Third Quarter Recap
Total revenue advanced 13% to $58.3 million. Three of Shuffle Master's four business units reported growth. Electronic gaming machines reported stellar growth of nearly 96% and accounted for almost 31% of total quarterly sales. It benefitted from a jump in sales of its Equinox cabinet that houses PC-based slot machine games. The next best performing segment was utility, which helps clients such as casinos operated by the likes of Las Vegas Sands (NYSE:LVS), Wynn Resorts (Nasdaq:WYNN), and Boyd Gaming (NYSE:BYD) by providing card shufflers and related services. Utility saw sales advance 14% to $22.5 million. Proprietary table games (19% of sales) posted minimal growth as it sold fewer poker, baccarat and blackjack table games. Rounding out the segments, electronic table systems sales fell 42% (12% of sales) on fewer sales of games, such as those that use a virtual dealer to play traditional table games.

Operating income jumped 51% as product costs and operating expenses grew at a slower rate than sales. Net income growth was even stronger at 56% as earnings reached $9.1 million, or 17 cents per diluted share. This came in ahead of analyst projections.

Full-Year Outlook
Analysts currently project sales growth of more than 9% and total sales of $220.2 million for the entire year. The current profit projections also calls for 56 cents in earnings for the full year.

The Bottom Line
Over the past five full fiscal years, sales at Shuffle Master have risen a total of 23% to just over $200 million. This only represents modest annual sales growth while profit growth has been more erratic as the company posted negligible profitability in 2006 and an overall loss in 2008.

Steady utility sales, combined with more steadily improving sales of its slot-machine products that compete with larger rivals including International Game Technology (NYSE:IGT) and Bally Technologies (NYSE:BYI), could help push total annual sales growth into the double digits. This, combined with management's closer focus on cost controls, could help the company start posting more consistent earnings growth. At a forward P/E of close to 17, this will be needed to justify the high earnings multiple. (For additional reading, take a look at How To Analyze Mid-Cap Stocks.)

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