WMS Is Still Playing Nice

This column was originally published on RealMoney on Feb. 23 at 12:58 p.m. EST. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

With shares of WMS Industries (WMS Quote - Cramer on WMS - Stock Picks) up a good 50% over the past year, investors who are worried about the top-down health of the market may view the stock as an obvious one to take profits on as they prepare for some long-awaited market crash. I'd like to propose an alternative.

I view WMS' performance as an illustration of why a major market downturn could be legitimately avoided. From both a fundamental and technical point of view, WMS still appears strong even after the stock's nice run. This is the case with the majority of the insider-inspired stocks I am now in as well. So, with so much going right from a bottom-up perspective, why would I assume that a top-down collapse is inevitable?

Slots of Growth Potential

This update is about WMS specifically, so let's get to it. WMS is a gaming-equipment company that sells and leases slot machines and video-gaming terminals, and it posted yet another round of strong results in its second quarter (ended Dec. 31). Sales for the quarter increased nearly 19% year over year to $134.6 million. That was a record for the company, and it also beat expectations by a couple of million dollars.

Continuing to show leverage off its increasing top line, EPS increased an even more impressive 43% to 33 cents. Even if you back out the 3 pennies of nonoperating EPS, the result was solid.

Drivers of growth in the second quarter were similar to those in the first. International sales were good (up 45% year over year), and WMS' new products appear to be gaining traction in the market. The company also posted its first "racino" -- casinos at racetracks -- revenue from Pennsylvania and Florida.

With new products, new markets both domestically and abroad and cost containment that is allowing earnings to increase faster than revenue, the company's drivers make for a well-supported investment thesis and have also made it a good time to own WMS.

« Previous Page

1 2

Next Page »