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Stocks in this article: SHFL BYI WMS GPIC EGT

5. Shuffle Master supplies entertainment-based products for the gaming industry in four distinct categories: Utility products, Proprietary Table Games (PTG), Electronic Table Systems (ETS) and Electronic Gaming Machines (EGM).

For the latest first quarter ended Jan. 2011, the company reported total revenue of $43.8 million, up 8.6% year-on-year, largely attributable to a 24% and 33.7% revenue increase from proprietary table games and electronic gaming machines, respectively. Gross margin increased 500 basis points to 66.6%, while operating margin expanded 240 basis points to 16.1%. As a result, net income surged 30.6% to $4.8 million or 9 cents per share, compared to $3.7 million or 7 cents per share in the year-ago quarter. Analysts had estimated earnings of 8 cents per share.

The company achieved strong growth in all the product categories. Lease installed base of 7,344 shufflers increased 28% year-over-year at an average monthly lease of $454. Chipper units lease stood at 190 compared to 35 in the year-ago quarter. In the PTG segment, the company recorded a lease base of 5,237 units, 15.6% year-over-year increase. The company sold 13 units at an average price of $63,154, compared to the average price of $12,500 for 2 units sold during the first quarter of 2010.

ETS lease increased 12.6% to 2,583, while sold seats declined to 173 from 178. However, average selling price rose 6% to $22,688 from $21,410. Total EGM sales stood at 323, up 48.2% from 218, while average selling price increased 19.8% to $18,997.

Going forward, analysts expect the company to report earnings of 14 cents per share in the second quarter and 55 cents for the year ending 2011.

Of the nine analysts covering the stock, 67% recommend a buy, while the remaining rate a hold. There are no sell ratings on the stock. On average, analysts estimate an upside of 17% to $12.96 in value from current levels. The stock was recently upgraded to overweight from hold at EVA Dimensions LLC.

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