NEW YORK (TheStreet) -- Global Cash Access Holdings (GCA) plunged more than 15% on Wednesday after the integrated casino cash solutions provider announced its cash access agreements with Caesars Entertainment Operating Company (CZR) - Get Report would not be renewed after they expire on March 31.
GCA announced it decided not to renew the agreement because "it was not willing to accept the business and financial terms proposed by Caesars regarding the renewal of these agreements." The agreements covered automated teller machine services, point-of-sale debit services and credit card cash access services and ticket redemption device services.
The company also reaffirmed its adjusted EBIDTA and earnings per share estimates for the fiscal year 2014. GCA previously forecast adjusted EBIDTA in a range of $73 million to $76 million and cash EPS in a range of 82 cents and 87 cents.
Sterne Agee also decreased its target price on GCA to $10.50 from $12.
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TheStreet Ratings team rates GLOBAL CASH ACCESS HOLDINGS as a "buy" with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate GLOBAL CASH ACCESS HOLDINGS (GCA) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in net income, increase in stock price during the past year and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 20.8%. Since the same quarter one year prior, revenues slightly increased by 3.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The current debt-to-equity ratio, 0.47, is low and is below the industry average, implying that there has been successful management of debt levels.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the IT Services industry average. The net income increased by 29.7% when compared to the same quarter one year prior, rising from $4.40 million to $5.70 million.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- GLOBAL CASH ACCESS HOLDINGS has improved earnings per share by 33.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GLOBAL CASH ACCESS HOLDINGS reported lower earnings of $0.36 versus $0.38 in the prior year. This year, the market expects an improvement in earnings ($0.85 versus $0.36).
- You can view the full analysis from the report here: GCA Ratings Report
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.