NasdaqGS:SGMS

Stock Analysis Report

Executive Summary

Scientific Games Corporation develops technology-based products and services, and related content for the gaming, lottery, and digital gaming industries worldwide.

Rewards

Trading at 53.4% below its fair value

Earnings are forecast to grow 87.57% per year

Became profitable this year

Risk Analysis

Interest payments are not well covered by earnings

Large one-off items impacting financial results

Shareholders have been diluted in the past year



Snowflake Analysis

Good value with moderate growth potential.


Similar Companies

Churchill Downs

NasdaqGS:CHDN

Share Price & News

How has Scientific Games's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: SGMS has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

-1.4%

SGMS

3.4%

US Hospitality

2.0%

US Market


1 Year Return

13.6%

SGMS

19.3%

US Hospitality

23.5%

US Market

Return vs Industry: SGMS underperformed the US Hospitality industry which returned 19.2% over the past year.

Return vs Market: SGMS underperformed the US Market which returned 24.7% over the past year.


Shareholder returns

SGMSIndustryMarket
7 Day-1.4%3.4%2.0%
30 Day1.2%5.4%4.3%
90 Day19.9%16.5%12.2%
1 Year13.6%13.6%22.3%19.3%26.1%23.5%
3 Year70.2%70.2%47.3%37.4%53.1%43.2%
5 Year113.1%113.1%56.5%40.0%75.5%56.1%

Price Volatility Vs. Market

How volatile is Scientific Games's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is Scientific Games undervalued compared to its fair value and its price relative to the market?

>50%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: SGMS ($27.8) is trading below our estimate of fair value ($59.63)

Significantly Below Fair Value: SGMS is trading below fair value by more than 20%.


Price To Earnings Ratio

PE vs Industry: SGMS is good value based on its PE Ratio (21.5x) compared to the Hospitality industry average (25.1x).

PE vs Market: SGMS is poor value based on its PE Ratio (21.5x) compared to the US market (18.9x).


Price to Earnings Growth Ratio

PEG Ratio: SGMS is good value based on its PEG Ratio (0.2x)


Price to Book Ratio

PB vs Industry: SGMS has negative assets, so we can't compare its PB Ratio to the US Hospitality industry average.


Next Steps

Future Growth

How is Scientific Games forecast to perform in the next 1 to 3 years based on estimates from 11 analysts?

86.9%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: SGMS's forecast earnings growth (87.6% per year) is above the savings rate (1.7%).

Earnings vs Market: SGMS's earnings (87.6% per year) are forecast to grow faster than the US market (14.3% per year).

High Growth Earnings: earnings are expected to grow significantly over the next 3 years.

Revenue vs Market: SGMS's revenue (3.2% per year) is forecast to grow slower than the US market (7.5% per year).

High Growth Revenue: SGMS's revenue (3.2% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: Insufficient data to determine if SGMS's Return on Equity is forecast to be high in 3 years time


Next Steps

Past Performance

How has Scientific Games performed over the past 5 years?

21.4%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: SGMS has a large one-off gain of $129.1M impacting its September 30 2019 financial results.

Growing Profit Margin: SGMS became profitable in the past.


Past Earnings Growth Analysis

Earnings Trend: SGMS has become profitable over the past 5 years, growing earnings by 21.4% per year.

Accelerating Growth: SGMS has become profitable in the last year, making the earnings growth rate difficult to compare to its 5-year average.

Earnings vs Industry: SGMS has become profitable in the last year, making it difficult to compare its past year earnings growth to the Hospitality industry (-18.9%).


Return on Equity

High ROE: SGMS's liabilities exceed its assets, so it is difficult to calculate its Return on Equity.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is Scientific Games's financial position?


Financial Position Analysis

Short Term Liabilities: SGMS has negative shareholder equity, which is a more serious situation than short term assets not covering short term liabilities.

Long Term Liabilities: SGMS has negative shareholder equity, which is a more serious situation than short term assets not covering long term liabilities.


Debt to Equity History and Analysis

Debt Level: SGMS has negative shareholder equity, which is a more serious situation than a high debt level.

Reducing Debt: SGMS's has negative shareholder equity, so we do not need to check if its debt has reduced over time.

Debt Coverage: SGMS's debt is not well covered by operating cash flow (4.5%).

Interest Coverage: SGMS's interest payments on its debt are not well covered by EBIT (1x coverage).


Balance Sheet

Inventory Level: SGMS has a low level of unsold assets or inventory.

Debt Coverage by Assets: SGMS has negative shareholder equity (liabilities exceed assets) therefore debt is not covered by short term assets.


Next Steps

Dividend

What is Scientific Games's current dividend yield, its reliability and sustainability?


Dividend Yield vs Market

companyn/amarketbottom25%1.4%markettop25%3.7%industryaverage2.8%forecastin3Years0%

Current dividend yield vs market & industry

Notable Dividend: Unable to evaluate SGMS's dividend yield against the bottom 25% of dividend payers, as the company has not reported any payouts.

High Dividend: Unable to evaluate SGMS's dividend yield against the top 25% of dividend payers, as the company has not reported any payouts.


Stability and Growth of Payments

Stable Dividend: Insufficient data to determine if SGMS's dividends per share have been stable in the past.

Growing Dividend: Insufficient data to determine if SGMS's dividend payments have been increasing.


Current Payout to Shareholders

Dividend Coverage: Insufficient data to calculate payout ratio to determine if its dividend payments are covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: No need to calculate the sustainability of SGMS's dividend in 3 years as they are not forecast to pay a notable one for the US market.


Next Steps

Management

What is the CEO of Scientific Games's salary, the management and board of directors tenure and is there insider trading?

1.7yrs

Average management tenure


CEO

Barry Cottle (58yo)

1.6yrs

Tenure

US$23,616,423

Compensation

Mr. Barry L. Cottle has been the Chief Executive Officer, President and Director of Scientific Games Corp since June 1, 2018. Mr. Cottle is Executive Chairman of SciPlay Corporation since April 2019. Mr. C ...


CEO Compensation Analysis

Compensation vs Market: Barry's total compensation ($USD23.62M) is above average for companies of similar size in the US market ($USD4.99M).

Compensation vs Earnings: Insufficient data to compare Barry's compensation with company performance.


Management Age and Tenure

1.7yrs

Average Tenure

58yo

Average Age

Experienced Management: SGMS's management team is not considered experienced ( 1.7 years average tenure), which suggests a new team.


Board Age and Tenure

7.0yrs

Average Tenure

66yo

Average Age

Experienced Board: SGMS's board of directors are considered experienced (7 years average tenure).


Insider Trading

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Recent Insider Transactions

BuyUS$1,021,00001 Oct 19
MacAndrews & Forbes Holdings, Inc.
EntityCompany
Shares50,000
Max PriceUS$20.42
BuyUS$2,083,00027 Sep 19
MacAndrews & Forbes Holdings, Inc.
EntityCompany
Shares100,000
Max PriceUS$20.83
BuyUS$2,298,00023 Sep 19
MacAndrews & Forbes Holdings, Inc.
EntityCompany
Shares100,000
Max PriceUS$22.98
BuyUS$8,361,85023 Sep 19
Ronald Perelman
EntityIndividual
Role
Chairman of the Board
Independent Chairman
Shares405,000
Max PriceUS$22.41
BuyUS$2,241,00019 Sep 19
MacAndrews & Forbes Holdings, Inc.
EntityCompany
Shares100,000
Max PriceUS$22.41
SellUS$1,093,60317 Sep 19
Richard Haddrill
EntityIndividual
Role
Vice Chairman
Vice Chairman of the Board
Shares45,681
Max PriceUS$23.94
BuyUS$1,515,75024 Jun 19
MacAndrews & Forbes Holdings, Inc.
EntityCompany
Shares75,000
Max PriceUS$20.21
BuyUS$2,434,80019 Jun 19
MacAndrews & Forbes Holdings, Inc.
EntityCompany
Shares120,000
Max PriceUS$20.29
BuyUS$2,170,30018 Jun 19
MacAndrews & Forbes Holdings, Inc.
EntityCompany
Shares110,000
Max PriceUS$19.73

Ownership Breakdown

Dilution of Shares: Shareholders have been diluted in the past year, with total shares outstanding growing by 2.1%.


Management Team

  • Kevin Sheehan (65yo)

    Senior Advisor

    • Tenure: 1.6yrs
    • Compensation: US$7.71m
  • Barry Cottle (58yo)

    CEO, President & Director

    • Tenure: 1.6yrs
    • Compensation: US$23.62m
  • Bill Pfund (65yo)

    Vice President of Investor Relations

    • Tenure: 5.8yrs
  • Bobby Shore

    Senior Director of Investor Relations & Corporate Finance

    • Michael Quartieri (51yo)

      Executive VP

      • Tenure: 3.8yrs
      • Compensation: US$1.47m
    • Michael Winterscheidt (48yo)

      Senior VP & Chief Accounting Officer

      • Tenure: 2.9yrs
      • Compensation: US$793.47k
    • Stephen Richardson (51yo)

      Senior VP

      • Tenure: 1.8yrs
    • Jim Sottile (58yo)

      Executive VP & Chief Legal Officer

      • Tenure: 1.3yrs
    • Trent Kruse

      Senior Vice President of Investor Relations & Finance

      • Steven Stamstad

        Senior Vice President of Marketing & Communications

        • Tenure: 0.8yrs

      Board Members

      • Paul Meister (66yo)

        Independent Director

        • Tenure: 7.8yrs
        • Compensation: US$244.97k
      • Ronald Perelman (76yo)

        Independent Chairman

        • Tenure: 6.2yrs
        • Compensation: US$234.97k
      • Barry Schwartz (70yo)

        Independent Director

        • Tenure: 16.1yrs
        • Compensation: US$262.75k
      • Dick Haddrill (66yo)

        Vice Chairman of the Board

        • Tenure: 5.1yrs
        • Compensation: US$1.65m
      • Barry Cottle (58yo)

        CEO, President & Director

        • Tenure: 1.6yrs
        • Compensation: US$23.62m
      • Peter Cohen (72yo)

        Vice Chairman & Lead Independent Director

        • Tenure: 15.3yrs
        • Compensation: US$269.97k
      • Kneeland Youngblood (64yo)

        Independent Director

        • Tenure: 1.4yrs
        • Compensation: US$230.42k
      • Mike Regan (76yo)

        Independent Director

        • Tenure: 13.9yrs
        • Compensation: US$279.97k
      • Frances Fragos Townsend (57yo)

        Independent Director

        • Tenure: 9.8yrs
        • Compensation: US$261.66k
      • Jim Kennedy (62yo)

        Chairman of Lottery

        • Tenure: 1yrs
        • Compensation: US$1.95m

      Company Information

      Scientific Games Corporation's company bio, employee growth, exchange listings and data sources


      Key Information

      • Name: Scientific Games Corporation
      • Ticker: SGMS
      • Exchange: NasdaqGS
      • Founded: 1984
      • Industry: Casinos and Gaming
      • Sector: Consumer Services
      • Market Cap: US$2.602b
      • Shares outstanding: 93.25m
      • Website: https://www.scientificgames.com

      Number of Employees


      Location

      • Scientific Games Corporation
      • 6601 Bermuda Road
      • Las Vegas
      • Nevada
      • 89119
      • United States

      Listings

      TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
      SGMSNasdaqGS (Nasdaq Global Select)YesClass A Common StockUSUSDAug 1984
      TJWDB (Deutsche Boerse AG)YesClass A Common StockDEEURAug 1984

      Biography

      Scientific Games Corporation develops technology-based products and services, and related content for the gaming, lottery, and digital gaming industries worldwide. The company’s Gaming segment sells new and used gaming machines, electronic table systems, video lottery terminals, conversion game kits, and spare parts; slot, casino, and table-management systems; table products, including shufflers; and perpetual licenses to proprietary table games. It also leases gaming machines; provides gaming operations and licensing arrangements; and installs and supports casino management systems, such as ongoing hardware and software maintenance and upgrade services of customer casino management systems. The company’s Lottery segment designs, prints, and sells instant lottery products; designs and manufactures instant games tickets; offers instant products planning, monitoring, management system, warehousing, inventory management, distribution, marketing, and game support functions; supplies player loyalty programs, merchandising services, and interactive marketing campaigns; and sublicenses brands for lottery products and lottery-related promotional products. It also provides software, hardware, and related services for lottery operations; and lottery systems software maintenance and support services. The company’s Social segment sells virtual coins, chips, or bingo cards; and third-party branded games and original content through mobile and Web platforms. Its Digital segment provides digital gaming and sports wagering solutions and services, including digital RMG and sports wagering solutions, distribution platforms, content, products, and services; software design, development, licensing, maintenance, and support services; Open Platform Systems; and content aggregation platforms. The company was founded in 1984 and is headquartered in Las Vegas, Nevada. 


      Company Analysis and Financial Data Status

      All financial data provided by Standard & Poor's Capital IQ.
      DataLast Updated (UTC time)
      Company Analysis2020/01/17 23:38
      End of Day Share Price2020/01/17 00:00
      Earnings2019/09/30
      Annual Earnings2018/12/31


      Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.