On October 13, 2023, Light & Wonder Inc (LNW, Financial) saw a daily gain of 4.34%, contributing to a 3-month gain of 13.05%. With an Earnings Per Share (EPS) (EPS) of 3.96, the question arises: is the stock fairly valued? This article aims to answer that question by providing a comprehensive analysis of Light & Wonder's valuation. Let's dive in.
Introduction to Light & Wonder
Light & Wonder is a leading player in the electronic gaming machine manufacturing industry, providing machines to pubs, clubs, and casinos worldwide. The company also has a significant presence in the mobile gaming sector through its subsidiary, SciPlay. With a market cap of $6.90 billion, the company's stock is currently trading at $75.31 per share. How does this compare with its intrinsic value? Let's find out.
Understanding the GF Value
The GF Value is a proprietary measure by GuruFocus that estimates a stock's fair value. It's based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. If a stock's price is significantly above the GF Value Line, it may be overvalued, and if it's significantly below, it may be undervalued.
According to GuruFocus' valuation method, the stock of Light & Wonder appears to be fairly valued. This suggests that the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength of Light & Wonder
When investing in a company, it's crucial to assess its financial strength. Light & Wonder's cash-to-debt ratio is 0.23, which is worse than 65.19% of companies in the Travel & Leisure industry. This indicates that the financial strength of Light & Wonder is poor.
Profitability and Growth
Light & Wonder's profitability and growth are key factors in its valuation. The company has been profitable for 2 out of the past 10 years, with an operating margin of 19%. However, its 3-year average EBITDA growth rate is -8.8%, which ranks worse than 70.53% of companies in the Travel & Leisure industry.
ROIC vs WACC
Another way to assess a company's profitability is by comparing its Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC). Light & Wonder's ROIC is 8.72 while its WACC is 6.88, indicating the company is creating value for its shareholders.
Conclusion
In conclusion, Light & Wonder's stock appears to be fairly valued. Despite its poor financial strength and profitability, the company's growth ranks better than 70.53% of companies in the Travel & Leisure industry. To learn more about Light & Wonder, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
