Scientific Games a Good Bet

Scientific Games Corp. (SGMS - Analyst Report) has a leading position in several markets, including the instant ticket and online lottery markets. In addition, Scientific Games continues to win significant contracts in both the instant ticket and online lottery markets from both domestic and international lottery authorities.

Also, the company has made several acquisitions that have accelerated top-line growth. Ron O. Perelman, a world-renowned private investor, owns 28% of the company's stock. The Buy rating is maintained.

Scientific Games is currently selling at 15.3 times trailing 12 month earnings. Over the last few years, the stock has normally traded in the wide P/E range of 16 to 38 with the decline in the fourth quarter of 2008 driving the valuation down to 9.6.

When the stock traded at significant P/E premium, it was a result of the company's leading market position in the fast growth instant ticket lottery market, though recent dilutive acquisitions and the company's leveraged balance sheet somewhat mitigate Scientific Games' international expansion initiatives and cost-containment efforts. The six-month target price of $22.50 is based on a 20 P/E multiple on 12-month trailing earnings.

Read the full analyst report on SGMS