As state governments struggle with falling tax revenue, legalized gambling is looking better and better as a way to raise money. For investors in Shuffle Master (NASDAQ:SHFL), which makes automatic card shufflers, chip counters, and other casino doohickeys, that could mean a big jackpot in the future.

Yet with gaming behemoths like Las Vegas Sands (NYSE:LVS) and Wynn Resorts  (NASDAQ:WYNN) experiencing bottom-line shrinkage in their most recent quarters, you might not think Shuffle Master would outperform. Nevertheless, the company surprised analysts with its fiscal-third-quarter results.

Shuffle Master's top line fell 9% to $45.1 million on softer product sales and a stronger dollar. But revenue from leasing, royalties, and servicing grew 4% to $21 million. Gross margins widened significantly, and the company's bottom line landed at $5.6 million, 87% higher than last year's third quarter. Earnings of $0.10 per share beat expectations of $0.07.

Smart dynamics
So while the likes of MGM Mirage  (NYSE:MGM) and Penn National (NASDAQ:PENN) have seen their businesses flounder lately, Shuffle Master is holding its own.

The news is encouraging for shareholders, who've now seen the company's share price rise more than 300% from its March lows. CEO Timothy Parrott, who took the reins during the same month that the company's stock price hit bottom, has dedicated himself to finding the best balance between product sales and leasing revenue while working to contain costs amid the challenging economy. His efforts seem to be paying off.

Under certain circumstances, Shuffle Master's rise in inventories might alarm some investors. But given that its leasing business is booming, some inventory buildup isn't necessarily a cause for concern.

Please, no more bets
Some of the market's biggest opportunities have been coming out of stocks tied to gaming. All of the companies mentioned in this article have appreciated more than 100% from their 52-week lows, so those familiar with the industry have had plenty of opportunities to capitalize on the near-implosion of the sector earlier this year.

After the run-up, though, investors have priced in lofty growth expectations for Shuffle Master. Despite expected growth rates of around 22% annually, its multiple of 29 times forward earnings makes its shares anything but dirt cheap.

So while at these prices Shuffle Master is far from a screaming buy, it's worth putting the stock on your watch list. With its new CEO and long-term prospects intact, Shuffle Master would quickly bounce back from a potential short-term dip.

Do you see any big opportunities in gaming? Do you think Shuffle Master is worth paying up for? Share your opinions in the comments section below.

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Fool contributor Chris Jones owns no shares of any company mentioned in this article, nor is he short anything. Try any of our Foolish newsletter services free for 30 days. On a warm summer's evenin' on a train bound for nowhere, I met up with The Motley Fool's disclosure policy; we were both too tired to sleep.