Fast-Growing Gaming Technology Firm Looks Poised To Move Higher

Aug.28.12 | About: Bally Technologies, (BYI)

I am always on the lookout for stocks that have strong earnings growth, reasonable valuations and that are showing recent positive momentum and/or catalysts. One recent stock that has just popped up on my screening radar is Bally Technologies (NYSE:BYI)

Key recent catalysts for Bally Technologies:

  • Brean Murray initiated coverage on BYI today with a "Buy" rating and a $54 price target on the stock.
  • Consensus earnings estimates for both FY2012 and FY2013 have both been revised up in the last month.
  • Earlier in the month, the company provided a strong earnings report that beat slightly on the top and the bottom lines. More importantly, it reported the best sales of new gaming devices in three years.

Bally Technologies is a diversified gaming company. The company designs, manufactures, operates, and distributes technology-based gaming devices, systems, and server-based solutions worldwide. It offers technology solutions, which provide gaming operators with a range of marketing, data management and analysis, accounting, player tracking, security, and other software applications and tools to manage their operations. (Business description from Yahoo Finance)

4 reasons BYI is a good growth pick at $44 a share:

  1. The company is showing solid earnings growth. BYI booked $2.45 a share of earnings in FY2011 but is on track to earn $3.16 in FY2012. Analysts have it pegged for $3.53 a share in FY2013.
  2. The stock is selling at less than 13 times forward earnings, a discount to its five-year average (18.9).
  3. BYI is selling near the bottom of its five-year valuation range based on P/CF and P/E. The median price target on the shares by the analysts that cover the stock matches Brean Murray's call for $54 a share.
  4. The company bought back $33mm worth of shares in the recently completed quarter and still has $58mm left on its repurchase program. It has also has some medium-term technical support just below the current price level (See Chart)

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Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in BYI over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.