March 2, 2011
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Scientific Games (Nasdaq: SGMS ) surged almost 11% in early trading after the maker of technology for lotteries and other types of gaming reported better-than-expected fourth-quarter sales.
So what: Revenue fell 9% to $212.1 million. Analysts were expecting just $202.7 million, validating December's big purchase by company insiders.
Now what: Even so, this isn't a growth story. The company's operating loss improved to just $11 million thanks to fewer non-cash charges. Debt is also up over the past year, from $1.37 billion to $1.39 billion.
Scientific Games says it produced $61.9 million in free cash flow during 2010, but that's balanced against more than $100 million in interest payments over the same period. Seeing that, I wonder where the funds for growth will come from and who will end up paying the tab. Keep clear of this stock, Fool.
Interested in more info on Scientific Games? Add it to your watchlist. You can also try any of our Foolish newsletter services free for 30 days.