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

  • SGMS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $12.5 million.
  • SGMS has traded 69,567 shares today.
  • SGMS is down 3.1% today.
  • SGMS was up 6.7% yesterday.

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More details on SGMS:

Scientific Games Corporation provides gaming solutions to lottery and gaming organizations worldwide. The company operates in three segments: Printed Products, Lottery Systems, and Gaming. Currently there are 3 analysts that rate Scientific Games Corporation a buy, 1 analyst rates it a sell, and 1 rates it a hold.

The average volume for Scientific Games Corporation has been 478,000 shares per day over the past 30 days. Scientific Games has a market cap of $1.3 billion and is part of the services sector and leisure industry. The stock has a beta of 1.50 and a short float of 3.8% with 1.92 days to cover. Shares are up 80.4% year to date as of the close of trading on Friday.

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 Scientific Games Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:

  • SGMS's revenue growth has slightly outpaced the industry average of 3.5%. Since the same quarter one year prior, revenues slightly increased by 4.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, SGMS's share price has jumped by 71.80%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • 43.26% is the gross profit margin for SCIENTIFIC GAMES CORP which we consider to be strong. Regardless of SGMS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SGMS's net profit margin of -5.52% significantly underperformed when compared to the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Hotels, Restaurants & Leisure industry average. The net income has decreased by 3.1% when compared to the same quarter one year ago, dropping from -$12.59 million to -$12.98 million.
  • Net operating cash flow has decreased to $46.80 million or 23.81% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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