Amaya Inc. (TSX:AYA), one of the largest gaming and online gambling companies in the world and the company behind brands such as PokerStars and Full Tilt Poker, announced record fourth-quarter earnings before the market opened on March 31, and its stock has responded by jumping over 8%. Let’s take a closer look at the quarterly results to determine if we should consider buying in to this rally, or if we should wait for it to subside.
The record-setting results
Here’s a chart of Amaya’s fourth-quarter earnings results compared to its results in the same period a year ago.
|Metric||Q4 2014||Q4 2013|
|Adjusted Earnings Per Share||$0.42||$0.12|
|Revenue||$368.64 million||$37.08 million|
Source: Financial Times
In the fourth quarter of fiscal 2014, Amaya’s diluted adjusted earnings per share increased 250% and its revenue increased 894.1% compared to the same quarter a year ago. The company noted that these very strong results could largely be attributed to its US$4.9 billion acquisition of Rational Group, the parent company of PokerStars and Full Tilt Poker, which was completed in August of 2014.
Here’s a quick breakdown of five other notable statistics and updates from the report compared to the year-ago period:
- Adjusted net earnings increased 670.5% to $85.74 million
- Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 826.8% to $154.66 million
- Adjusted EBITDA margin contracted 300 basis points to 42%
- Cash flow from operating activities increased 1,732.5% to $55.76 million
- Total assets increased 1,525.8% to $7.17 billion
Amaya also provided its outlook on fiscal 2015, calling for the following performance:
- Adjusted net earnings in the range of $367-415 million, an increase of 153.1-186.2% from fiscal 2014
- Adjusted diluted earnings per share in the range of $1.77-2.00, an increase of 152.9-185.7% from fiscal 2014
- Revenues in the range of $1.62-1.74 billion, an increase of 135.5-152.9% from fiscal 2014
- Adjusted EBITDA in the range of $670-715 million, an increase of 128.7-144% from fiscal 2014
Does Amaya belong in your portfolio?
Even after the large post-earnings pop in Amaya’s stock, I think it represents a great long-term investment opportunity. I think this because the stock still trades at attractive valuations, including just 17.3 times the company’s median earnings per share outlook of $1.89 for fiscal 2015, which is very inexpensive compared to its long-term growth potential.
With all of the information provided above in mind, I think investors should strongly beginning to scale in to long-term positions in Amaya today.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Joseph Solitro has no position in any stocks mentioned.