If, as someone once suggested, playing the lottery is tantamount to paying a voluntary tax, what can we say about folks who buy shares of GTECH Holdings
Well, one thing's for sure: If history is any guide, those investors don't appear to be the gambling types. Indeed, for the trailing 10 years that ended with November, GTECH has returned 16.1% on an annualized basis, outperforming the S&P 500 by nearly seven percentage points. This mid-cap powered through the reign of the bear, too, posting gains of 120.2% and 23% in 2001 and 2002, respectively.
This year, GTECH is up roughly 21%, but investors gave the company a bit of a haircut on Friday, sending its shares down 1.3% on trading volume that almost doubled the stock's three-month average daily volume.
So what's with all the wagering?
Well, not coincidentally, GTECH announced Q3 earnings before Friday's opening bell, and investors were apparently less than sanguine about revenue figures that clocked in nearly 5% below those of the year-ago period. The announcement also included guidance that the firm's Q4 earnings would come in at $0.45 to $0.48 per share, a range whose high end just matches the consensus analyst estimate, according to data from Thomson Financial Network.
All told, this time out, GTECH missed the analysts' Q3 mark by a penny, reporting earnings per share of $0.37 on net income of $47.8 million, which represents an increase of more than 4% relative to that of a year ago.
I know. I'm scratching my head, too, concerning these mixed results. And as I'm scratching, I'm thinking that there are grounds for cautious optimism here -- particularly considering that Foolish colleague Philip Durell recommended GTECH to his Motley Fool Inside Value subscribers back in the newsletter's May edition.
Since Phil gave the stock the nod, GTECH has appreciated by more than 35%. What's more, despite that sharp uptick and substantial year-to-date gain, the company sports a trailing-12-month price-to-earnings ratio lower than that of Scientific Games
For more of the inside scoop on GTECH, check out Phil's full report by taking his Inside Value newsletter for a risk-free spin. It won't cost you a dime for 30 days, and your chances of earning a return with Inside Value are far greater than with, say, your state lottery.
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