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Bull of the Day: Dave and Busters Entertainment (PLAY)

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Dave and Busters Entertainment (PLAY - Free Report) is an owner and operator of dining and entertainment venues across North America. Headquartered in Dallas Texas, their venues offer food and drink, as well as an assortment of entertainment games and televised sporting events. The locations offer a unique blend of entertainment for adults with a bar atmosphere, along with games for children. Their venues offer a place where you can take the family on a Friday night and everyone is entertained, wheter it be sports, drinks, food or video games. The company is the Bull of the Day after it recently became a Zacks Rank #1 (Strong Buy).

PLAY has a market cap of $1.3 Billion with a Forward PE of 19. The stock is a growth play as the company shows high EPS growth, a factor giving it a Zacks Style Score of “A” in Growth. In addition, the company sits in an industry that is ranked 31 out of 265 (Top 12%) of the Zacks Industry Rank.

Pull back an opportunity?

The stock has not fared well over the last six months. Pressures on the indices would be the root cause for this as investors have been selling every growth stock they can find. The stock is down over 14% during that time period versus the 12% drop in the S&P 500. While you typically would like to see relative strength against the over market, sometimes a growth stock just goes too far down and presents an opportunity. The company has become interesting is a long-term growth play with an attractive PE.

Earnings and Estimates

Last quarter, the company had a 300% EPS surprise to the upside and saw revenue shoot up 17.5% year over year. CEO Steve King went into detail about same store sales on the call: “On a two-year basis we accelerated comparable store sales sequentially with the 17.5% gain during the third quarter, compared to a 16.7% gain in the second quarter and a 14.6% gain in the first quarter. And once again, we exhibited strength across day parts, days of the week, weekend and most geographies, demonstrating the power of our Eat Drink Play and Watch branding.”

Over the last 90 days, analysts have revised estimates 9.2% higher for fiscal year 2016 and 8.5% for 2017. These revisions show strong earnings power going forward into the next report. The company reports earnings on April 5th, in which investors hope another EPS surprise can shift momentum around to the bulls.

EPS Surprises

With estimate revisions headed higher gives reason to believe selling pressure might stop causing momentum to swing higher. In addition, Dave and Busters has surprised to the upside on EPS in every quarter since it went public. The company will shoot for its sixth straight beat in April, which if achieved, would help the stock bounce back from the recent sell off.

Future growth

The chart below shows the future expected EPS growth along with the stock price.  If Dave and Busters can maintain expected EPS growth, or even better keep surprising to the upside, the stock has room to head higher. Analysts see the long-term potential of the company going into 2019 and investors should be buying the stock before EPS is realized.

In Summary

Dave and Busters has fallen victim to recent widespread selling that has spread across the global equities markets. Opportunities are presenting themselves in many areas as investors are selling first and asking questions later. In the case of PLAY, there is a long-term growth opportunity as the stock has come down almost 25% from its 2015 highs. Investors have a chance to enter at current price levels so they may take advantage of this unique growth story.

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