Opportunity Shines at Ameristar

Even when the broader market is a shambles, there are good stocks out there. Take Ameristar Casinos (ASCA Quote), for instance.

Unlike its struggling peers, Ameristar continues to report record earnings. In part, that's because Ameristar is smaller than its giant rivals; with the stock around $24, the company has a market cap of around $630 million.

But it's also worth noting that Ameristar is well-placed in fast-growing markets, and that the company keeps spending to improve its properties. Combined with the market opportunities just now opening up before the company, it's that devotion to investment that makes this a story to watch.

Ameristar runs casinos in fast-growing markets in Missouri, Iowa, Mississippi and Nevada, drawing almost 60% of its EBITDA from Kansas City and St. Charles, Mo.

St. Charles is a key for Ameristar, because the company has a huge new casino coming on line there next month, replacing one that's barely a third its size. There are roughly 3.7 million adults that live within a 100-mile radius of nearby St. Louis, which means this is an ample market opportunity.

Given that opportunity, I think the company has the potential to grow EBITDA from about $184 million in 2002 to more than $205 million in 2003. That's not too shabby.

Better yet, Ameristar is cheap next to its peers. The stock trades at less than six times EBITDA and just 12 times 2002 earnings estimates. That's a sharp discount to industry players including MGM Mirage (MGG Quote), which trades at seven times EBITDA and 17.5 times forward estimates, and Harrah's (HET Quote), which also trades at 7 times EBITDA and 15.6 times estimates. And it's less than Wall Street's forecast earnings growth rate.

Maybe the deck isn't quite stacked, but I like the odds on Ameristar right about now.

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