AGS Stock Cheap with Double Potential
Shares of expansion slot political machine producer AGS (NYSE:AGS) are trading higher today after the companion reported second-quarter earnings before interest, taxes, wear and tear and amortisation (EBITDA) that trounce Wall Street estimates.
While the gunstock is up 28.27% off its July lows, some analysts are betting on more upside out front as gambling casino operators rising slope expansion slot offerings. In a mention to clients today, B. Riley psychoanalyst St. David Bain reiterates a “buy” rating on AGS spell boosting his toll point on the carry to $14 from $12, implying the shares can to a greater extent than two-baser from stream levels. He points out the gillyflower is deeply discounted congener to competitors.
AGS trades for 5.3x/4.8x CY22E/CY23E EV/EBITDA, a 41%/40% deduction to the cassino provider mathematical group average, and it carries an 18% nett free people hard cash flux succumb versus peers at ~11%. We proceed to trust AGS shares should rerate higher,” wrote the analyst.
The April through and through June full stop represents the 9th straight canton inwards which AGS crush analysts’ earnings estimates.
AGS Stock may non Be Cheap for Long
Valuation alone isn’t a ground to buy or sell a stock, but inwards the pillow slip of AGS, the company has catalysts that could designate the shares won’t be inexpensive for an extended period.
For example, cassino visitation trends are warm across the US, compelling operators to poke out the slot upgrade cycle owing to the heights margins offered by gaming machines. Specific to AGS, the company is adding securities industry share and derives 70% of its sales from revenant revenue streams.
“Further, AGS tabularize business is scarce, immensely recurring with over 60% margins – electric current and former valuation multiples of specialty tabularise public companies reach between 11x and 13x (value clear not incorporated into AGS shares),” notes Bain. “AGS has been quiet and consistently outperforming expectations.”
The psychoanalyst adds that as the keep company 2022 and 2023 clear purchase retreats to 3.8x and 3.4x, respectively, the stock deduction compared to peers should evaporate.
Texas-Sized Catalyst
In June, the that Texas cannot mental block the Ysleta del Sur Pueblo from offering bingo games on its qualification nigh El Paso. That ruling could get electropositive implications for the Alabama-Coushatta — another TX tribe — and AGS.
It remains to live seen if those TX tribes follow traditional cassino licenses, but that’s a possibility and if that take form of gaming is opened inwards the second-largest state, AGS stands to benefit.
“AGS cited a June 15 Supreme Margaret Court decision which clarified the right on for both the Alabama-Coushatta and Ysleta del Sur Pueblo tribes to proceed to control Class II gaming at existing facilities. We trust this secures over $10M in existing per annum revenant Earnings Before Interest Taxes Depreciation and Amortization from participation games for AGS,” concludes Bain. “Further, AGS cited elaboration opportunities with both tribes, matching our earliest checks.”