Like many of its brethren in the gaming industry, Pinnacle Entertainment (NYSE:PNK) will look back fondly on 2006. Once just a second-tier riverboat operator with a few bold ideas, the company is quickly emerging as a major player -- and many will point to the year as the turning point.

Since January, Pinnacle has raised $164 million in capital, broken ground on one expansion project, completed another, unveiled plans for a stunning $350 million resort on the Louisiana Gulf Coast, and acquired 18 valuable acres of real estate in the heart of the Atlantic City Boardwalk.

The company has made great strides over the past 12 months, and the market has responded enthusiastically -- pushing the shares up more than 40% for the year.

Now, it's time to see if Pinnacle can keep this up.

Playing for bigger stakes
Much of Pinnacle's recent success can be traced back to two properties: Boomtown New Orleans and L'Auberge Du Lac in Lake Charles, Louisiana. Thanks to those resorts, the company has raked in more than $466 million in revenues over the past two quarters, nearly as much as the $531 million generated in all of fiscal 2003.

At the moment, those two casinos represent roughly half of the firm's total revenues and an even greater percentage of property-level EBITDA. Not surprisingly, Pinnacle has plowed more money into both of them to bolster its standing in those key markets next year.

Several months ago, the firm broke ground on a $45 million expansion project in Lake Charles that will add a 250-room hotel tower. Based on anecdote (I can't ever manage to book a room there), the resort will benefit handsomely from the added capacity, particularly for accommodating business conventions and other large groups.

Also set for 2007, the firm will begin construction next to Lake Charles on the Sugarcane Bay Resort, which will have a Caribbean theme and capitalize on one of two gaming licenses acquired through an asset swap with Harrah's Entertainment (NYSE:HET).

In New Orleans, Pinnacle has just announced an upgrade to its Boomtown expansion plans. Following a $145 million refurbishment, the resort will feature four-star accommodations, exciting dining options, spruced-up amenities, and a new single-deck barge filled with 1,600 slot machines and 60 table games.

The makeover should greatly enhance Boomtown's competitive position in the New Orleans market -- which includes Harrah's land-based casino and Boyd Gaming's (NYSE:BYD) Treasure Chest -- particularly with billions of dollars in casino renovations pouring into nearby Mississippi.

Branching out
While Pinnacle has taken the steps to strengthen its position in existing markets, there is more buzz surrounding its two new locales: St. Louis and Atlantic City.

In St. Louis, a new flagship casino is expected to open next year in the LaClede's Landing district -- not far from the famous Arch. To revitalize the area, Pinnacle has teamed up with a development group that intends to adorn the resort with an upscale condominium tower.

Soon after, an even larger casino/entertainment complex will open just south of St. Louis, complete with a bowling alley, a multiplex, indoor ice skating, and other attractions. Combined, the two properties will cost nearly $800 million, a hefty bet for a company the size of Pinnacle.

Perhaps the most exciting news, though, is the company's recent purchase of the Sands Casino in Atlantic City. Though the impact won't be felt for a while, the opportunity to develop a high-end resort on the Boardwalk could dramatically boost Pinnacle's cash flows and allow management to ramp up its cross-marketing capabilities.

No growing pains yet
Thus far, Pinnacle's growth plans have proceeded smoothly, and 2007 looks to be another busy year.

L'Auberge Du Lac quickly overtook Harrah's Horseshoe to become Louisiana's highest-grossing riverboat casino. If the firm can duplicate that success in St. Louis and build on recent gains at Belterra and Lake Charles, then shareholders stand a good chance of being rewarded over the next year or two.

Despite the recent run-up, the shares are still trading at just 11 times trailing operating cash flow, a multiple well below the industry average.

Beyond that, management has already secured additional funding and strengthened ties with lenders, and investors will be waiting eagerly to hear what Pinnacle has in store for its long-term development pipeline. For its part, Wall Street is targeting long-term average earnings growth of nearly 18% per year.

Regardless, it will be exciting to see what unfolds.

Check out the other companies featured in "The Motley Fool's 2006 in Review and 2007 Preview" special.

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Fool contributor Nathan Slaughter owns shares of Boyd Gaming, but none of the other companies mentioned. At the Fool, we never gamble with our disclosure policy.