Friday - B.Riley has resumed coverage on PlayAGS, Inc. (NYSE:AGS) with a Buy rating and a price target of $16.00.
"We view AGS as an uncomplicated gaming supplier story with multiple visible upside levers to consensus estimates and its stock valuation," said the analysts.
According to B.Riley, PlayAGS is currently trading at multiples of 4.8x and 4.3x its expected CY24E/CY25E enterprise value to EBITDA, which is 37% and 42% below the average of its peers, respectively. The stock is also trading approximately 28% below its average one-year forward EV/EBITDA. Despite this discount, the company has been gaining momentum in market share, which the firm believes should contribute to future quarters where PlayAGS outperforms expectations.
B.Riley suggests that if PlayAGS were to trade at its historical EV/EBITDA average of around 6.5x, which is still about 17% below peer trading valuations, the stock would be priced at $16 per share. The firm anticipates that the stock's valuation could be revised upwards due to the company's strong performance indicators and visibility over the next 18 months.
The firm also predicts that valuation re-rating could be driven by several upcoming quarterly catalysts. These include a reduction in net leverage to below 3x by the third quarter of 2024, continued outperformance in key performance indicators (KPIs), and earnings before interest, taxes, depreciation, and amortization (EBITDA) and free cash flow (FCF) that beat consensus estimates.
InvestingPro Insights
As B.Riley sets a promising outlook for PlayAGS, Inc. (NYSE:AGS), real-time data from InvestingPro further enriches the narrative. With a market capitalization of $332.61 million and a high gross profit margin of 70.67% in the last twelve months as of Q4 2023, AGS demonstrates a strong ability to generate earnings relative to its revenue. Despite a high Price/Earnings (P/E) ratio of 853, which suggests that the stock may be trading at a premium based on current earnings, the company has outperformed in revenue growth with a 15.22% increase over the last year.
An InvestingPro Tip worth noting is that AGS's liquid assets exceed its short-term obligations, indicating a solid liquidity position. Additionally, the company has seen a large price uptick of 28.29% over the last six months, reflecting positive investor sentiment. For readers interested in a deeper dive into PlayAGS's performance and potential, there are additional InvestingPro Tips available, providing insights such as trading at a high Price/Book multiple and the analysts' anticipation that the company may not be profitable this year. Unlock these insights and more with a subscription to InvestingPro, and don't forget to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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