Everi Holdings Inc: Up 75% This Year But More to Come

Everi Holdings Inc: Up 75% This Year But More to Come
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EVRI Stock: Small-Cap Gaming Tech Stock With Great Upside

An intriguing small-cap gaming technology company that has been delivering decent financial growth with good prospects is Everi Holdings Inc (NYSE:EVRI). Its stock has staged an impressive 75% rally this year, but is still 26% off its 52-week high.

The company provides products and financial technology (fintech) to the casino gaming sector.

During the December 2018 stock market sell-off, Everi Holdings stock plummeted along with the broader market. In June and July 2019, the stock drifted sideways, but it failed to break above $12.50 on several attempts.

EVRI stock subsequently followed the distribution channel with a massive “falling knife” formation, a bearish signal that is generally followed by more selling.

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After that, Everi Holdings stock declined to the low $8.00 level before staging a V-shaped rally and a move back up to the key $9.00 level.

A sustained rally could drive the stock back toward the $12.50 level.

Chart courtesy of StockCharts.com

My Bullish Thesis for EVRI Stock

Everi Holdings Inc adjusted its reported revenues in 2018 based on the new “ASC 606” revenue recognition standard aimed at making financial reporting more consistent regardless of industry.

In the case of Everi, the company reported total revenues of $469.5 million in 2018, up from $410.75 million in 2017. (Source: “Everi Reports 2018 Fourth Quarter and Full Year Results,” GlobeNewswire, March 12, 2019.)

Looking ahead, the positive revenue growth is expected to continue based on ASC 606 adoption.

Everi is estimated to increase its revenues by 9.3% to $513.3 million this year and then by eight percent to $554.2 million in 2020. (Source: “Everi Holdings Inc. (EVRI),” Yahoo! Finance, last accessed September 23, 2019.)

The company generated positive earnings before interest, taxes, depreciation, and amortization (EBITDA) in the last five years on a generally accepted (GAAP) basis, including a five-year high in 2018.

Fiscal Year EBITDA (Millions) Growth
2014 $70.6
2015 $196.1 178.0%
2016 $182.0 -7.2%
2017 $206.4 13.4%
2018 $221.5 7.3%

(Source: “Everi Holdings Inc.MarketWatch, last accessed September 23, 2019.)

The earnings picture is bullish for Everi Holdings Inc. The company reported an adjusted $0.07 per diluted share in 2018 and is estimated to ramp this up to $0.29 this year and to $0.49 in 2020. (Source: Yahoo! Finance, op. cit)

Everi is on pace to beat the earnings per share (EPS) consensus for this year, after beating in the first two quarters of 2019 and in the trailing four straight quarters.

The company also delivered positive GAAP free cash flow in three of the last four years, including a five-year high of $190.0 million in 2018.

Analyst Take

The strong fundamental picture helps support a bullish case for Everi Holdings Inc. The casino gaming sector is a multi-billion-dollar industry, and this company appears to be set for strong growth opportunities. That could propel Everi Holdings stock higher.

The forward five-year compound annual growth rate (CAGR) for the company’s earnings is expected to be 20%, versus -27.4% for the trailing five years. This marked improvement should bode well for EVRI stock.