Today's Perilous Reversal Stock: Multimedia Games (MGAM)

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 $14.5 million.
  • MGAM has traded 52,596 shares today.
  • MGAM is down 3.1% today.
  • MGAM was up 9.2% yesterday.

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More details on MGAM:

Multimedia Games Holding Company, Inc., through its wholly owned subsidiary, Multimedia Games, Inc., develops and distributes gaming technology. The company creates and supplies comprehensive systems, content, and electronic gaming units for Native American and commercial casinos. MGAM has a PE ratio of 19.6. 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 295,500 shares per day over the past 30 days. Multimedia Games has a market cap of $715.9 million and is part of the services sector and leisure industry. The stock has a beta of 1.95 and a short float of 5.5% with 2.02 days to cover. Shares are down 16% 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 Multimedia Games as a buy. 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, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 5.9%. Since the same quarter one year prior, revenues slightly increased by 4.5%. 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.
  • MGAM's debt-to-equity ratio is very low at 0.11 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 5.25, which clearly demonstrates the ability to cover short-term cash needs.
  • MULTIMEDIA GAMES HOLDING CO's earnings per share declined by 10.7% 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, MULTIMEDIA GAMES HOLDING CO increased its bottom line by earning $1.15 versus $0.98 in the prior year. This year, the market expects an improvement in earnings ($1.28 versus $1.15).
  • The gross profit margin for MULTIMEDIA GAMES HOLDING CO is currently very high, coming in at 80.82%. Regardless of MGAM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 15.18% trails the industry average.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, MULTIMEDIA GAMES HOLDING CO's return on equity exceeds that of both the industry average and the S&P 500.

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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