WAUKEGAN, Ill. (

TheStreet

) --

Market Vectors' Gaming ETF

(BJK) - Get Report

, a barometer of casino operators, notched a 34% gain over the past year, beating the 9% increase of the

S&P 500 Index

. But if you're looking to play the casino stocks, a safer bet is slot-machine maker

WMS Industries

(WMS) - Get Report

.

WMS Industries, based in Waukegan, Ill., has achieved a 12-month growth rate of 9% for revenue and 37% for profit. Casino operators

Las Vegas Sands

(LVS) - Get Report

and

Wynn Resorts

(WYNN) - Get Report

, on the other hand, suffered quarterly losses during the past year and carry excessive debt.

WMS Industries' focus on equipment, rather than operations, helps insulate its business from cyclical declines. Fiscal fourth-quarter net income rose 32% to $28 million and earnings per share climbed 36% to 49 cents, boosted by a lower share count. Revenue grew a more modest 6% to $196 million.

Its gross margin rose from 60% to 65% and its operating margin increased from 20% to 22%. WMS Industries has an ideal financial position, with $155 million of cash, compared to $115 million of debt. A quick ratio of 3.2 and a debt-to-equity ratio of 0.2 confirm its fiscal prudence.

WMS Industries trades at a price-to-earnings ratio of 28, a premium to the market, and casino and gaming peers. The shares are also expensive based on book value and sales, but analysts expect the company to extend its impressive operating results. The stock has a forward price-to-earnings ratio of 25.

The company has outperformed larger rival

IGT

(IGT) - Get Report

, which posted lower sales and profits during the recession. IGT's quarterly net margin of 13% is below WMS Industries' 15%. Its stock has underperformed WMS as well. Over the past five years, WMS shares have advanced 172% while IGT's declined 33%.

Bryan Ashenberg, portfolio manager of

TheStreet.com Breakout Stocks

, notes "Las Vegas casinos are collectively shifting their focus from expansion to increasing profitability through branding, marketing and building customer loyalty. We believe that a key component of the new plan will include refreshing casino floors with new slot machines. If this strategy is followed, it will clearly benefit WMS."

Browse this week's

"Under the Radar"

picks.

--

Reported by Jake Lynch in Boston.