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Isle of Capri Casinos, Inc.

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Barring a few hiccups, shares of Isle of Capri Casinos, Inc. (ISLE) have been on a long-term uptrend since the beginning of 2012, as the U.S. casino industry had a modest recovery despite fears of a double-dip recession. Given strong back-to-back quarters with earnings surprises of 26.7% and 70.0%, along with expected year-over-year earnings growth of 21.2% in fiscal 2013, Isle of Capri looks like a solid growth stock.

This gaming company currently retains a Zacks #1 Rank (Strong Buy), which it achieved on May 23, 2012.

Strong Fourth Quarter

On June 7, Isle of Capri reported that fourth quarter revenue grew 13.4% to $291 million, while fiscal 2012 revenue increased 4.3% to $977.4 million.

Adjusted EPS increased 40.7% year-over-year to 38 cents, beating the Zacks Consensus Estimate by more than 26%. For fiscal 2012, adjusted EPS soared 152.9% year-over-year to 43 cents, primarily due to a refined business model, favorable weather conditions and significant cost reductions.

Consolidated adjusted EBITDA for the quarter increased to $69.3 million from $63.5 million in the year-ago quarter. For fiscal 2012, consolidated adjusted EBITDA increased to $200.6 million from $190.0 million in the year-earlier period.

Isle of Capri intends to initiate significant capital improvement programs in its portfolio in fiscal 2013. Plans include renovated hotel rooms, new buffets and a full rollout of enhanced customer loyalty programs. Total corporate and development expenses in fiscal 2013 are expected to be $40 million, while total capital expenditures are expected to be in the range of $140 million - $150 million.

Surge in Earnings Estimate Revisions

Over the past 30 days, the Zacks Consensus Estimate for fiscal 2013 increased 52.9% to 52 cents, as 8 of 9 estimates moved up. For fiscal 2014, the Zacks Consensus Estimate has also increased by 52.9% to 78 cents, as four of six estimates were revised upward.

Reasonable Valuation

Isle of Capri’s valuation looks reasonable on a price-to-earnings (P/E) and price-to-sales (P/S) basis. Shares are currently trading at a forward P/E of 10.40x, an 18.5% discount to the peer group average of 12.76x. On a P/S basis, the company is currently trading at 0.20x versus 2.30x for the peer group average.

Chart Resonates Growth Potential

Earnings estimates for fiscal 2013 are moving higher for Isle of Capri as mirrored in the following 12 Month EPS chart. The year-to-date return for the stock is noteworthy at 16.05% compared to a NASDAQ tally of 8.86%.

Based in St. Louis, Missouri, Isle is a premier gaming and entertainment company in the U.S. The company owns and operates 15 casinos under the Isle and Lady Luck brands in diverse locations such as Mississippi, Louisiana, Iowa, Missouri, Colorado and Florida. The company presently has a market cap of $212.5 million.

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