Why Multimedia Games (MGAM) Stock Continues To Advance Today

NEW YORK (TheStreet) -- Shares of Multimedia Games Holding Co. Inc. (MGAM) are higher by 29.32% to $35.92 on very heavy volume, in mid-afternoon trading on Monday.

The company, which designs, manufacturers, and supplies gaming machines and systems to casino operators, is being acquired by Global Cash Access (GCA) for $1.2 billion in cash.

So far, 9.72 million shares of Multimedia Games have exchanged hands as compared to its average daily volume of 271,000 shares. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Global Cash, a provider of cash access data intelligence and solutions to the gaming industry, said it agreed to acquire the Multimedia Games' outstanding stock for $36.50 per share.

The company is purchasing Multimedia Games as the acquisition "strengthens and broadens GCA's portfolio of solutions, which has been embraced by our customer base," said Global Cash CEO Ram Chary.

Additionally, several law firms have announced they are launching investigations into Multimedia Games to determine if the company breached its fiduciary duties to shareholders by failing to conduct a fair sales process, and whether or not the sale undervalues the company, negatively affecting shareholders. 

Shares of Global Cash Access are down by -0.47% to $7.49.

Separately, TheStreet Ratings team rates MULTIMEDIA GAMES HOLDING CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate MULTIMEDIA GAMES HOLDING CO (MGAM) a BUY. This is driven by several positive factors, 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 and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • The revenue growth came in higher than the industry average of 5.6%. 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 ($1.25 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, MGAM's net profit margin of 15.18% compares favorably to the industry average.
  • Looking at the price performance of MGAM's shares over the past 12 months, there is not much good news to report: the stock is down 27.07%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.
  • You can view the full analysis from the report here: MGAM Ratings Report

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