It's no secret that the gaming industry is on fire. Great results from casino operators such as Mandalay Resort Group (NYSE:MBG) and MGM Mirage (NYSE:MGG) are documented and reflected in soaring stock prices.

Strong quarters from slot king International Game Technology (NYSE:IGT) and table game leader Shuffle Master (NASDAQ:SHFL) likewise show up in the charts. Or consider riverboat casino operator Ameristar Casinos (NASDAQ:ASCA), which has tripled over the past year.

Why all the excitement? Ameristar holds the leading market share in each of its markets. And it managed this while competing with Harrah's Entertainment (NYSE:HET) in all four riverboat markets, though Harrah's exited the Vicksburg, Miss., market last fall. Briefly put, Ameristar's attractive locations, classy brand, advanced gaming floors, and complete entertainment package have made it a dominant competitor.

Let me put it another way:

Ameristar's Market Share Growth 

  
    
      Market               Q4 '01  Q4 '02  Q4'03St. Louis, MO        19.9%   29.4%   32.0%Kansas City, MO      32.5%   34.3%   35.7%Council Bluffs, IA   37.6%   39.4%   40.1%Vicksburg, MS        35.5%   40.2%   43.5%

Naturally, Ameristar's market share in terms of absolute percentages won't grow indefinitely. However, the trend is pretty clear.

Yesterday, the company raised its first-quarter guidance, saying that earnings would come in at $0.57 per share, rather than $0.40 to $0.44. As a result, the market bid the stock to a 52-week high. It was up another 10% to $33.55 today.

But here's the kicker: Ameristar is still cheap.

Using a common metric, Ameristar's enterprise value at under $1.4 billion is about six times 2004 EBITDA (earnings before interest, taxes, depreciation, and amortization). That's less than the 7.2 times EBITDA Harrah's will pay for Jack Binion's Horseshoe Gaming and the 7.4 times EBITDA Boyd Gaming (NYSE:BYD) will pay for Las Vegas locals operator Coast Casinos.

To put things into further perspective, for Ameristar to trade at seven times EBITDA, the stock would have to climb another 25% or $8.50 per share.

At its current price, the stock trades at a reasonable 11 times this year's free cash flow, with an enterprise value of roughly 17 times free cash flow. Backing out the $40 million the company will spend on coinless slots (an expense that won't recur next year) gives you a price-to-free cash flow multiple of 7.4 times and an enterprise value-to-free cash flow multiple of 11.4 times.

For a dominant competitor, Ameristar is dirt cheap. Clearly, some jitters remain over the gaming tax issues in the riverboat markets in general, and in Missouri in particular, where the company derives about two-thirds of its EBITDA. But if you've been out to the Midwest and are familiar with any of its properties, I think that the stock is a pretty easy buy.

Fool contributor Jeff Hwang owns shares of Ameristar Casinos.