WMS Industries—and its WMS Gaming subsidiary—has been one of the victims of the slow replacement cycle for slot machines in recent years, resulting in its stock trading at less than half of its price a year ago. However, this very fact makes WMS stock one of gaming’s most smart buys, according to reports from some analysts.
In the “Weekly Trader” report of Barron’s magazine in November, analysts were quoted as saying WMS is possibly the most under-valued of the slot supplier stocks. Trading in the low 20s—half of where it was at the start of the year—the stock is being treated like that of a company on the “verge of bankruptcy,” said Donald Cleven, a portfolio manager for Touchstone Mid Cap Value Fund.
“Despite near-term challenges, the valuation of WMS is completely irrational,” Cleven told Barron’s. “The risk/reward of an investment in WMS is still very compelling at today’s levels.”
Cleven pointed out that part of the flat revenues reported by WMS was due to a longer regulatory approval cycle for some of the manufacturer’s most innovative new games. Combined with the slow economy, he said, that has caused some investors to overreact. However, with as many as seven strong titles set to be introduced this year, Cleven said, “WMS is poised to introduce a robust new product offering to the market.”
Steven Wieczynski, gaming equipment analyst at Stifel Nicolaus, agreed, saying that the time to buy WMS stock is now. “We wouldn’t keep a ‘buy’ on the stock if we thought the story was technically broken here,” Wieczynski told Barron’s. “It’s very compelling on a valuation basis.”