Bally Technologies (NYSE: BYI) designs,
manufactures, operates and distributes advanced gaming devices and associated information systems. Products include reel-spinning slot machines, video slots, wide-area progressives and lottery games, as well as an array of casino management, slot accounting, bonusing, cashless operation and table management systems. Bally also owns and operates the Rainbow Casino in Vicksburg, Mississippi.
The company pleased investors earlier in the week, when it announced fiscal Q3 EPS of 52 cents and revenues of $232.6 million. Analysts had been expecting 48 cents and $231 million. Operating income increased to 24% of revenue from 10% in the comparable period last year and from 20% in the December 2007 quarter. Management also guided FY08 EPS to $1.78-$1.90 ($1.79 consensus), FY08 revenues to levels above $885 million ($894.02M consensus) and FY09 EPS to $2.10-$2.50 ($2.24 consensus).
BYI shares
popped through 200-day and 90-day moving average resistance on the news and then moved into a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with one "strong buy", three "buys" and three "holds". Analysts see a 30% average annual growth rate, through the next five years. The BYI Sales Growth rate (32.77%), EPS Growth rate (333.33%), Operating Margin (17.68%), Return on Assets (9.23%), Return on Investment (13.01%) and Return on Equity (34.94%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 95% of the outstanding shares. Over the past 52 weeks, the stock has traded between $23.22 and $52.83. A stop-loss of $35.90 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold a position in the stock discussed above.
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