It appears that Cryptologic has weathered the US prohibition on cash transfers related to gambling from October 2006, and earnings have begun to increase on a sequential basis.
The Company reported $0.19 per share earnings in the 3rd quarter vs the average estimate of $0.13 per share, a 46% positive earnings surprise.
CRYP has over $6 per share of cash on the books, so if you back that off the current stock price of $19, you get $13 of earnings-related share price. Compare that to the $0.89 per share earnings expected for 2008 and the stock is trading at an adjusted 14X 2008 earnings.
For a company that should grow between 20% to 25% per year for the next 5 years, the shares appear very cheap to me.
I am very happy with my investment in Cryptologic and I am expecting nice price appreciation over the next year as other investors learn about the Company and its prospects.
Disclosure: Long CRYP