Motley Fool Stock Advisor recommendation Shuffle Master (NASDAQ:SHFL) wandered up to the table Monday and revealed its Q1 hand. Was it a good one?

For its first quarter, Shuffle Master grew its top line by 31%, taking in $33.3 million of net revenue. Operating income increased 18% to $11.4 million, income from continuing operations increased more than 18% to $7.2 million, and net income jumped 20% to $7.4 million. This includes stock-compensation costs.

I've always liked Shuffle Master, truth be told. I am not a casino gambler (thank goodness), but I've owned the stock before and did make some money from it. This was a very good quarter for the company; I'm glad to see that, even with the stock-compensation costs, net income rose by double digits.

Going back to Rich Smith's Foolish Forecast, we see that Shuffle Master went beyond the call of duty in terms of revenues. The company was forecast to bring in about $31 million for the quarter. However, the gross margin tells a different tale.

Starting with revenues, subtracting the costs of leases, royalties, sales, and service, and then dividing that by the revenue base, we see that the gross margin is about 70%. At the end of the previous quarter, the gross margin was about 74%. One year ago, it was almost 77%. This is exactly what Rich was concerned about: Even with the revenue increases, the decline in this metric is troubling. The margin situation decreased in terms of operating income (to 34%) and net income (to 22%) as well.

Does this mean that Shuffle Master should be considered too much of a long-term gamble? Well, I'm not ready to give up on Shuffle Master as an investment idea just yet. Right now, the company is pursuing an acquisition strategy aimed at increasing shareholder value. It purchased Stargames, an Australian entity which the company believes will help earnings down the line; it also struck an interesting alliance with Sona Mobile to make it easier to distribute its gaming products across wireless platforms.

Personally, I believe these strategies should eventually bear fruit. In addition, net cash provided by operating activities jumped nearly 80% to $9.7 million; granted, with all the cash involved with acquisition activity, there really wasn't a lot of free cash lying around (note that the company didn't repurchase any common stock this quarter, according to the lines dedicated to cash flows from financing activities); again, though, the company is thinking of the future.

Shuffle Master believes it can grow earnings 28% to 31% for the full fiscal year. I wish that guidance had included stock expenses, but it doesn't. Nevertheless, if even this qualified range pans out, the company stands a good chance of experiencing some excellent growth. Casinos aren't really my thing, but this sector offers a wonderful thesis. Companies like International Game Technology (NYSE:IGT) and AmeristarCasinos (NASDAQ:ASCA), along with Shuffle Master, should capture a lot of discretionary income over time from consumers. But I concede that margins must be closely examined in further reports.

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Fool contributor Steven Mallas owns shares of none of the companies mentioned. The Fool has a disclosure policy.