MENU

Why The Stars Group Inc. Is up Over 9%

What happened?

Global gaming and interactive entertainment company The Stars Group Inc. (TSX:TSGI)(NASDAQ:TSG) is up over 9% so far in today’s trading session after the company raised its full-year guidance for fiscal 2017 and announced the prepayment of second-lien debt this morning.

So what?

Here’s a breakdown of The Stars Group’s updated guidance for fiscal 2017 compared with its previous guidance:

Metric Updated guidance Previous guidance
Revenues US$1,285 million-US$1,315 million US$1,200 million-US$1,260 million
Adjusted EBITDA US$590 million-$610 million US$560 million-US$580 million
Adjusted net earnings US$445 million-US$469 million US$413 million-US$437 million
Adjusted net earnings per share (EPS) — diluted US$2.17-US$2.31 US$2.01-US$2.15

The Stars Group’s updated guidance calls for revenue growth of 11-14%, adjusted EBITDA growth of 13-16%, adjusted net earnings growth of 21-28%, and adjusted EPS growth of 15-23% compared with its results in fiscal 2016. The company had already raised its full-year guidance in its second-quarter earnings release last month, so this raise came as a welcomed surprise to the market.

The company also announced that it will be prepaying without penalty an additional $75 million under its second-lien term loan during the week of September 18-22 using cash on hand and cash flow from operations; this will bring its total repayment of second-lien debt to $115 million so far in 2017, and it will reduce its annual interest expense to approximately $9.5 million and the principal balance of its second-lien term loan to just $95 million.

Now what?

The Stars Group’s stock is up over 1% since I last recommended it on August 10 following its very strong second-quarter earnings release, and I think it represents an even more attractive long-term investment opportunity today, because it’s even more undervalued than before; the stock now trades at just 8.8 times the low end of its new guidance and a mere 8.3 times the high end of its new guidance for fiscal 2017, both of which are very inexpensive given its current double-digit percentage earnings-growth rate.

With all of this being said, I think Foolish investors should strongly consider initiating long-term positions in The Stars Group today with the intention of adding to those positions on any significant pullback in the future.

5 stocks we like better than The Stars Group Inc.

When investing Guru Iain Butler and his shrewd team of analysts have a stock tip, it can pay to listen. After all, the newsletter they began just three years ago, Stock Advisor Canada, is already beating the market by 9.6%. And their Canadian picks have literally doubled the market.

Iain and his team just revealed what they believe are the five best stocks for investors to buy right now... and [stock] wasn't one of them! That's right - they think these five stocks are even better buys.

*returns as of 5/30/17

Fool contributor Joseph Solitro has no position in any stock mentioned.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.