Gaming technology firm and ex-Motley Fool Stock Advisor recommendation Shuffle Master
What analysts say:
- Buy, sell, or waffle? Nine analysts follow Shuffle Master, giving the stock three buy ratings, five holds, and a sell.
- Revenues. On average, they're looking for a 3% slide in quarterly sales, to $44.6 million.
- Earnings. Profits could be cut nearly in half, to $0.10 per share.
What management says:
No news would have been better than almost any of the news out of Shuffle Master recently. Management warned investors in a December SEC filing that it would be a bit late turning in its most recent 10-K. The company promised to get it in "no later than January 14, 2008." Before that, we learned that CEO Mark Yoseloff is planning to jump ship, although he has agreed to stay on at least through October. That's not encouraging, given that just before that news, Yoseloff warned that "reverting back to a lease model" (as opposed to selling gaming equipment outright) "will cost the Company $0.20 to $0.25 a share in earnings in 2007." Worse yet, the month before, Shuffle Master lost its CFO to resignation, with the COO immediately stepping in on an "acting" basis.
What management does:
To put all this in context, now, let's see how margins have been moving at Shuffle Master:
4/06 |
7/06 |
10/06 |
1/07 |
4/07 |
7/07 |
|
---|---|---|---|---|---|---|
Gross |
70.1% |
68.5% |
65.2% |
63.5% |
61.7% |
59.3% |
Operating |
35.1% |
30.3% |
25.8% |
21.2% |
18.4% |
16.4% |
Net |
7.9% |
6.7% |
3.1% |
(0.1%) |
9.5% |
6.6% |
One Fool says:
So the net seems to be stabilizing -- although we'll probably see it deteriorate again on the expected charges to earnings. Meanwhile, operationally, the downward trend continues, as gross margins contract and take the firm's operating margin along for the ride.
Objectively speaking, Shuffle Master seems to be imploding. But relative to its competitors, the company's margins are still in the middle of the pack. WMS Industries
Then again, having customers in dire straits probably isn't exactly good news for Shuffle Master, either.