Why Scientific Games (SGMS) Stock Is Plummeting Today

NEW YORK (TheStreet) -- Shares of Scientific Games Corp. (SGMS) are down -18.22% to $8.84 on Friday as a result of the -$45 million net loss the company reported for the 2014 first quarter, compared to a net loss of -12.3 million from the same period last year.

The global supplier of solutions to lottery and gaming organizations said net loss per share for the most recent quarter was -53 cents versus a net loss of -15 cents from the 2013 first quarter.

Scientific games said revenue rose to $338 million, compared to $219.6 from the year ago quarter.

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TheStreet Ratings team rates SCIENTIFIC GAMES CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate SCIENTIFIC GAMES CORP (SGMS) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • SGMS's very impressive revenue growth greatly exceeded the industry average of 4.0%. Since the same quarter one year prior, revenues leaped by 62.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 93.33% and other important driving factors, this stock has surged by 41.54% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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.
  • The gross profit margin for SCIENTIFIC GAMES CORP is rather high; currently it is at 51.71%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -0.90% is in-line with the industry average.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, SCIENTIFIC GAMES CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio is very high at 8.51 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, SGMS's quick ratio is somewhat strong at 1.46, demonstrating the ability to handle short-term liquidity needs.
  • You can view the full analysis from the report here: SGMS Ratings Report
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