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Trade-Ideas: Multimedia Games (MGAM) Is Today's "Perilous Reversal" Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Multimedia Games (MGAM) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Multimedia Games as such a stock due to the following factors:

  • MGAM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $12.7 million.
  • MGAM has traded 218,592 shares today.
  • MGAM is down 3.1% today.
  • MGAM was up 5.5% yesterday.

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More details on MGAM:

Multimedia Games Holding Company, Inc., together with its subsidiaries, engages in the design, manufacture, distribution, and maintenance of gaming machines, video lottery terminals, and associated systems and equipment. Currently there are 4 analysts that rate Multimedia Games a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Multimedia Games has been 284,800 shares per day over the past 30 days. Multimedia Games has a market cap of $1.1 billion and is part of the services sector and leisure industry. The stock has a beta of 2.47 and a short float of 1.7% with 1.41 days to cover.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Multimedia Games as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, growth in earnings per share and compelling growth in net income. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 3.4%. Since the same quarter one year prior, revenues rose by 18.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • MGAM's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.96, which clearly demonstrates the ability to cover short-term cash needs.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 137.24% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MGAM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • MULTIMEDIA GAMES HOLDING CO has improved earnings per share by 12.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MULTIMEDIA GAMES HOLDING CO increased its bottom line by earning $0.98 versus $0.20 in the prior year. This year, the market expects an improvement in earnings ($1.09 versus $0.98).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry average. The net income increased by 16.6% when compared to the same quarter one year prior, going from $7.25 million to $8.45 million.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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