Shares of Scientific Video games ( SGMS 8.37% ), which supplies playing services to casinos, had been up 12.7% as of 12:30 p.m. ET on Wednesday. The corporate capped off a powerful 12 months of progress with the announcement that it’s shifting its technique to unlock extra worth for shareholders.
Administration plans to considerably pay down debt and repurchase shares. This comes on prime of the present divestiture of its lottery and sports activities betting companies, which might elevate as much as $7 billion in web money proceeds.
The information comes on the heels of a powerful end to the 12 months. Income from persevering with operations grew 20% 12 months over 12 months to $580 million within the quarter. The underside line additionally improved from a lack of $143 million within the year-ago quarter to a revenue of $62 million within the fourth quarter.
The corporate is within the strategy of promoting off its lottery and sports activities betting belongings, which ought to elevate loads of money to assist deleverage its stability sheet. Administration’s goal is to convey its web debt leverage ratio down from 3.5 to 2.5 by the top of the second quarter.
The inventory at present trades at a modest 15 instances trailing free money stream, which administration clearly sees as an excellent deal. The corporate approved a three-year $750 million share repurchase program, representing 12% of the corporate’s present market cap (share value instances whole shares excellent).
Normally, these strikes by firms to shore up funds, pay down debt, repurchase inventory at engaging valuation ranges, and concentrate on rising the core enterprise — on this case, digital and casino gambling merchandise — obtain an enormous thumbs-up from buyers, which explains the inventory’s bounce in the present day.
Over the long run, administration is guiding for double-digit income progress, excluding acquisitions, and increasing revenue margins. At a modest a number of to free money stream, there might be additional upside for this inventory if administration can execute on its objectives.
Scientific Gaming might be an under-the-radar growth stock value exploring.
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