Would You Put Your Money Down on IGT?

International Game Technology's (NYSE: IGT  ) strong fundamentals and earnings leap in its latest quarter make me feel rather bullish about the company's prospects. But are you paying a decent price if you jump in on this stock today?  

Profitability
Return on equity is a crucial metric that evaluates how effectively a company is using its capital. IGT's ROE, which stands at 21.1%, is significantly higher than that of comparables Scientific Games (Nasdaq: SGMS  ) , at -29.6%, and Multimedia Games (Nasdaq: MGAM  ) , at 11.4%.

But because ROE doesn't capture the complete financial picture, a better metric to follow here is return on invested capital, which takes into account a company's debt financing as well. On this basis, IGT, with an ROIC of 10.3%, looks better still than Scientific, at 3.2%, and Multimedia, at -1%. Right off the bat, I like what I see here.

Valuation
IGT's P/E ratio of 18.1 makes it look cheaper than Bally Technologies (NYSE: BYI  ) , at 20.2. But, at 10.3, Multimedia definitely scores better. My sense here, however, is that IGT is the better-quality company and has greater earnings potential going forward. Consider that IGT's forward P/E of 18.2 is lower than Scientific's 41.8 and Multimedia's 35.5. Clearly, the market is expecting a stronger year from this company.

Stability
Don't overlook the balance sheet when evaluating the health of a company's capital structure. With a debt-to-equity ratio of 111.9%, IGT doesn't look nearly as stable as its peers Bally, whose ratio stands at 29.9%, and Multimedia, at 39.6%.

The debt-to-capital ratio, another measure of financial leverage, gives a better picture of how the company is managing its debts. IGT, with a D/C ratio of 52.8%, is levered up well beyond its rivals and this makes me a bit nervous. Bally's ratio stands at 23%, while Multimedia is at 28.4%. Among these peers, Scientific is the only one that has a higher ratio than IGT.

Yields
Also note that IGT offers a reasonably attractive current yield of 1.50% and a stable payout ratio of 28%. That's not much, but considering that none of its peers we've discussed here pay anything, investors surely won't mind the extra income.

Considering its valuation and high debt levels, I wouldn't be surprised to see investors remaining cautious on IGT for now.