With estimates rising and shares plunging, the stock is showing fantastic value along with the growth outlook.

Company Description

Pinnacle Entertainment owns and operates 7 casinos in Louisiana, Missouri, Indiana, and Nevada. The company also has a racetrack in Ohio.

A Winning Quarter

On Aug 3 Pinnacle reported a 9.3% increase in second-quarter revenue, up to $299.1 million. Operating income jumped to $31.7 million from a $15.7 million loss a year ago.

Earnings came in at $0.17 per share, up from a $0.33 loss a year ago. That mark was also 9 cents better than the Zacks Consensus Estimate. The company now has 4 consecutive earnings surprises.

During the quarter Pinnacle invested in the hot Southeast Asian gaming market. The company invested in a company that is developing areas of in Vietnam. Additionally, the company still has a Baton Rouge casino and other expansion projects in its pipeline.

Outlook Up Sharply

Analysts quickly raised their full-year estimates on the earnings release. The Zacks Consensus Estimate for 2011 is up 18 cents, to $0.52. Next year's estimates are averaging $0.55, up 14 cents.

Given the $0.20 loss per share in 2010, this is quite a turnaround story.

Valuations

Shares of PNK are going for roughly 16 times the 2011 estimates, which put the PEG ratio at 0.8 times. So, the 22% expected earnings growth is currently priced at a discount.

The price to sales is at 0.45 and the stock is going for its book value.

The Chart

Price action on PNK has been downright scary though. You will have to ask yourself how much risk you are willing to take on this one, but at these levels rolling the dice on this Zacks #1 Rank (Strong Buy) might not be a bad idea.

Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service