This post is part of a special annual report -- Top Stock Picks '09 -- in which TheStockAdvisors.com asked 75 leading newsletter advisors to select their favorite investment for the new year.
"Situated well within a niche that appears to be an oasis in the desert is gaming machine maker WMS Industries (NYSE: WMS)," says growth stock specialist Ian Wyatt.
The editor of Top Stock Insights explains, "Gaming technology has not struggled as much as casino operators as there is still a need for new equipment to drive traffic to casinos."
The advisor continues, "WMS is engaged in the design, manufacture, and distribution of gaming machines and video lottery terminals (VLTs) for customers in gaming jurisdictions worldwide. Its offering consists of video gaming machines, mechanical reel gaming machines, and video poker gaming machines.
"While gaming certainly has taken a hit in the wake of the economic downturn, slot machine makers operate in a unique space that may be one of the few that has the ability to weather economic volatility, as states look to slots as a way to boost tax receipts.
"Further, the gaming technology sector has not struggled as much as casino operators as there is still a need for new equipment in the form of slots machines to drive traffic to casinos.
"Lending support to this, WMS reported a 41% increase in profit for its fiscal first quarter 2009 ended Sept.30. The company earned $15.7 million, or $0.27 per share, compared with $11.1 million, or $0.19 a share, for the same period a year ago, ahead of the consensus analyst estimate which called for earnings of $0.25.
"Revenue in the quarter increased 14% to $151.4 million, compared with $132.5 million a year ago – again ahead of the consensus estimate, which called for revenue of $148.3 million.
"WMS continues to expect success in 2009, looking for fiscal 2009 second-quarter revenue to range from $172 million to $178 million, compared with $159.2 million in the prior year and full-year fiscal 2009 revenue of $712 million to $728 million.
"We look for shares of WMS to move to the upside if the firm continues to surprise as it has in the recent past. The stock currently trades at less than 15 times forward year earnings -- we expect shares to be trading in the $32 to $35 a share area by year end 2009."
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