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Not me. I've been a sideline sitter since the mid 60's. I just like cheering on the way up. I'm also in way deep on EGMI as it has grown to be a 50% + position.
Yes, profit margin is high. Is it sustainable? For the time being it is, because they do have a patented device, so there is a monopoly. If they hit their 5 yr revenue targets, I'm sure there will be competitors. It seems though they are not resting on laurels of their device and are expanding its applications, that is why they are going after the different markets besides lottery. They are partnering with the right people to license and distribute.
Is there a high barrier to entry to make a competing device? Not really. SGMS already did that, they effectively stole the idea and pushed EGMI out of the three top lottery markets. SGMS design looks different enough to not violate a patent, but it looks a little more complicated. They are marketing their own proprietary product already in the US lottery market. EGMI though took a lump on the chin in the US, but they didn't back down. They've got the China contract in the works and Lord Steinberg's buddies for European distribution. EGMI will bide their time until they can get into the US again.
Could their manufacturer screw them over? A possibility, but the company is looking into manufacturing capabilities. Not sure where they go with this, as little has been said.
Sure there are risks with competition, but they have first mover advantage. It seems they are targeting the right channels to grow. My timeframe for reevaluation is in mid 2010. Negligible growth in the current Q doesn't mean much to me right now, but +/- 10% revenue and I will be listening intently to the business dynamics.
I think Price/Sales is a poor metric for this company. Their profit margins are huge, so the P/S will always appear large even compared to some of their peers. These guys are an earnings machine w/ their gross margins. Any incremental sales contributes large amounts to their bottom line. Wait until they start having the Thomas, QuizCards and than the China contract come into play. If they get strong revenue increases from these sources, the bottom line impact will be substantial. I'm holding until that plays out. That is where the growth will come in this stock. I put my money where my mouth is with this stock. It is about 58% of my portfolio.
Wow nice run this morning. I just wonder what is with the large run up recently. The have issued strong growth related guidance for over a year and there has been strong insider buying for some time. Maybe its just finally getting noticed and we will hit that growth related valuation we’ve been expecting. If its buying in anticipation of a blow out quarter I would love it, but don’t expect it. Sitting firmly here until they deliver with Thomas, the Moscoe Group channel and China contract. This will firmly send the stock up. Anything else positive that pops up is a new catalyst.
I'm in the camp that this Q will be kind of staid. If we get any solid Q to Q growth above 10%, than that is a solid sign to me that this should be worth $3 now. Either way, I'm waiting for 2010 for Moscoe and the China deal to flow through. With Moscoe and the Target relationship, this could get very interesting. I'm curious to know what other relationships Moscoe may have in their portfolio. Two items that will have significant contribution is the closing of the China deal and how it affects 2010 guidance and when Lord Steinberg opens up his rolodex. C'mon Lord, you need to support your new baby.
That's a 10 bagger on my first 27% of my shares. Almost 1/2 way to full 10 bagger on position.
Bought into DRAD w/ avg of $1.51 as well by selling a long time holding. Thought it would be a quick flip and buy back in to my other position. Was tempted to sell during the runup, but holding it after looking through the numbers and looking back a couple years. They are returning to profitability and gross margins have improved due to shuttering of some business ops. Revs are down a bit, but that goes with scaling back their ops a bit. They have solid cash/marketable securities levels, which they have held over the years. So they are really poised to continue posting nice numbers.
Looked through the numbers over the next few quarters. Given the state of the economy, the fact they can turn around their numbers in this type of environment bodes very well in the future. I think this stock is safely valued around $4, based on a conservative market multiple of 15 for this industry going forward on this Q's earnings + their cash. This stock used to be worth $5 when they were not earning money and $12 when they IPO'd in 2004. This is now about a 7.3% position. This seems fairly low risk to me.
"Been patient for two years, hell, another 2 months is not a big issue. "
Hear! Hear!
I was in this as a story investment a long time ago. Lost about 50%. Sold out. Started buying back more than 2 years ago. More than made up for my 50% loss because I went into this big time last year. The next 2 or 3 qtrs will have a large sway into how much longer I hold on or if I book some gains. Still way too early for me to sell based on available information. I have yet to book a 10 bagger, but this will be my first fairly soon.
$1.48 - Is smoke coming out of that keyboard yet???
Totally agree about the Lord. These are shares that will be held tightly. On top of that we still have funds available for a buy back. With EGMI generating serious cash flow, I'm curious what they will say in this Q about cash usage. The thing I love most about EGMI is that with it being undervalued and growing, one big news item will probably make this go parabolic.
Keep typing. Seems to work well for the stock price... ;)
Based on their earnings performance this stock should be $3.00 now. Even if they burn through their NOL's, their earnings growth is strong enough that paying taxes at the regular corporate rate will only slow their earnings growth for 2 maybe 3 quarters. Their revenue growth has been fairly steady. I'm waiting for their one blowout quarter. I'm hoping that comes this 4Q. That makes March-June 2010 a period where we can hit the true valuation on this company.
I conservatively say 4Q is the big Q for us. That's when the stars align and they roll out Thomas Cards for the holidays. I think that is a recession proof gift. Anything big news before that is gravy.
They tend to have a little lumpiness in their sales, given it's primarily one product driven. RES-Q-VAC tends to contribute to revenue spikes and this quarter saw a decline from last quarters spike. Freedom60 grew a little slower than I would have liked to see, but the growth is still evident. Hopefully not much more downside from here.
What are you talking about "if the market tanks", the market (S&P 500) has tanked 40% since the beginning of 2008. EGMI is up 105%. I'm not pumping, that is a fact. However I will agree that there may be a pull back if the market goes further south. However the dynamics of EGMI is building up, they have been steadily increasing revenues in this crappy market. I do not see where you get .13 tax adjusted. I think Roth is being conservative with their .20 for FY10. At worst maybe we get their old estimate of .18. In the past EGMI has been a fairly steady gainer of revenue. I do not see that faltering given their track record so far and these two new partnerships (yes one is not currently closed). We need a blow out quarter for us to catch more momentum. Unfortunately I don't see any reason for a blow out quarter until the 4th quarter when the Moscoe connections align with the release of the Thomas GameCards. The company anticipates Thomas going out the door fourth quarter in time for Xmas sales. If Moscoe uses their relationships for Thomas distribution, I see lightning in a bottle. If they have to do it the hard way, than Thomas is certainly a name brand that will catch eyes. You know they have caught attention with their cards in the lottery sales. Their cards are tested in those markets. I see no reason someone won't shell out $5-$10 for a Thomas card. Kids are addicted to this Thomas $hit. I know, I have a 3 1/2 yr old son. He is all over that Leapster stuff. A Thomas GameCard is quite appealing, especially as a low cost gift alternative. Can we say recession proof? With these guys all it takes is one big order, I was hoping Scientific Games would be the driver. They stabbed us in the back and twisted the knife, but EGMI did not go down. Their product has legs, that is why Steinberg is on board and hopefully the China lottery has some legs. That could have major impact once it is a done deal. I'm holding EGMI tight for now, even after I get my ten bagger. Only way I'll start unloading some is if this thing gets to more than 75% of my portfolio. Even than if dynamics do not change, I may only shed 10-15%. It is currently at 53%. Yes I love the stock, no I am not married to it.
GWMAN,
I'm similarly positioned w/ EGMI at about 55% of my portfolio. If it hits Roth's target of 1.75, I will have my first ten-bagger on about 30% of my shares. A ten-bagger for my entire holdings will be reached about $3.50. Based on the growth I'm seeing, I'm happy holding for the long term. Can't add because I need some diversification. I usually don't hold more than 10 different stocks.
Scratch that...
I look at it this way. Currently the stock is undervalued and growing. We want it recognized for at least some of the growth now, since it trades at approx 8x fwd 2009 earnings. Maybe when it has a large quarter and it blows away expectations it will get that growth PE. Right now it has been meeting its expectations and they are high at a 40% growth rate. So in the end, I will sit patiently watching the company execute and qtr after qtr as its earnings grows the stock will look more undervalued and the share price will appreciate. In the end if the company continues executing this is a win-win. I'll either get recognition of the growth and stock explodes, or earnings will grow and the stock will catch up. Given the company has a proprietary product, I feel they definitely have room to grow.
Have a great 4th EGMI'ers.
If there are idiots in this stock, than what does that say about people who are holding the other stuff out there? Who would have thought you could find a major growth stock with earnings in one of the worst recessions in history, besides the Great Depression? This stock is growth and value and majorly undiscovered. Okay, I'm gonna put down the pom poms...
I'm a bit shocked at the tepid response to the Roth update and the contract. However, it could be because of the lack of visibility of this Moscoe Group. While everything sounds impressive about them, there certainly is little information out there on these guys. EGMI booked .10 in FY08, company guidance for .14 in FY09 and Roth estimate of .20 for FY10. That's an over 40% growth rate. PEG Ratio of .22 based on FY09 earnings. This new contract apparently kicks in the 4Q of this year. Also in the 1Q CC, they mention Thomas and Friends should be shipping in time for Xmas in the UK market. The last part of this year should be a nice window into our future. This would be a buy for me if this wasn't already 55% of my portfolio. I believe a 20 PE for this company is a conservative proposition. I'm convinced this should be a $3 stock right now.
Irrelevant question of the day. What is Nordicware? Viking helmets? Otherwise, nice find. Makes me more comfortable about Moscoe. Also Roth upgrade is good too.
Our staff includes former Target Buyers, as well as employees who have worked for industry leaders like Clorox, Pillsbury, SC Johnson, Nordicware and Campbell's.
Trivial Information on FMM Moscoe Group.
The F in FMM is Arthur L Felsen. The other two are Moscoe brothers. Mr Felsen is unfortunately listed as a victim of the Madoff scheme.
Still searching, but the Moscoe Group deal has to prove me wrong that they can bring sizable revenue. Hopefully EGMI’s cards will prove to be enticing enough that the buyers at these large retailers see the benefits in the cards. If Moscoe group does have the connections, it would be big if they distribute the Thomas the Tank Engine cards through this relationship. If that is where we go with this, than I will be VERY impressed.
I've found the website and looked for info on them through the web, bloomberg and other business organizations. There really is not much info on them. For a company with that large of an access to many stores, if they did significant business I would've expected to find more info. My only conclusion is they may have the internal contacts, but they might not be a big player. I'm a bit disappointed.
I'm going to play skeptic here for today. Who the heck is Moscoe Group? I haven't been able to find any solid info on these guys.
Not lonely. Just early to the party.
got it off of bloomberg. not sure what is their source.
got it off of bloomberg. not sure what is their source.
What gets me is that short positions reported as of 5/29 is still 1.025 million shares. Sucks to be them.
I love the girls next door stocks like this one. Once they put on a nice dress and makeup, everybody thinks they are hot. I like them for what's underneath.
Maybe I should clarify I mean the company's value. Price and value are two different concepts. What I'm talking about is Value. Whatever the market prices EGMI at is different. They are still certainly undervalued relative to the numbers I stated. My belief is that the multiples expounded by Roth should be higher given the company’s growth and margins. They are not equalizing for those factors.
I think $5 end of year is a possibility if they can continue their qtr to qtr revenue growth at 15-20%. They have done that for 4 of last 6 quarters at approx 17.5% pace. That means they would be well on their way to reach their $110mm 5 yr target, factoring in a slowing of revenue growth near the end of the 5 yr period. Margins should stay roughly the same and market will value them for their growth. They would also be able to beat their guidance if all stated above occurs. Their product has been a proven hit in the lottery markets tested before Sci Games turned off the spigot. Hopefully this CLSL contract gets inked and they go to market by end of year. I'm also waiting for Lord Steinberg to press his buddies at Stanley Leisure or some other UK contacts into using his product. That would make next year really interesting. Still long, but not adding. At 55% of my portfolio, it is certainly enough.
Whoa... At the current price, I'm ecstatic. I have a very concentrated portfolio and this is clearly my biggest position at now 55% of my total. I may start looking to diversify if it moves up to 75% of my portfolio quickly.
This price move over the last few months has been Father's Day, my birthday, New Year's, Christmas and July 4th all rolled into one.
I think that is not the case. 500k is a drop in the bucket to a company like SGI and they will continue to pay the fee to lock us out of the top markets (US, Mexico, Canada & Italy). SGI has got a dog in the electronic game card race. They developed their own product after test marketing EGMI’s cards and seeing it was a huge hit. They are just starting to test market their own product in the US called PushPlay. SGI effectively stole the idea after joint venturing w/ EGMI. SGI probably saw the potential for EGMI to make inroads into the gaming industry with their game cards and didn’t want to be marginalized. They bought a cheap piece of insurance until they got their own product out the door. Luckily for us Lord Steinberg came around, as I think he has genuine interest in EGMI. Let’s hope our investment in EGMI makes inroads in the other lottery markets outside of the SGI agreement and in the promotions market. This will keep our stock price growing for sometime. We can take on SGI, once we are a larger and more formidable company. Personally I thought EGMI's product was simpler in design and suited the electronic scratch ticket better.
Unless i'm reading it wrong. I think SGI has the option to renew, not EGMI. Thus at most we are locked out for 10 years in US, Canada, Mexico and Italy. We get paid 500k annually for that option after the 3rd year. I think that's why EGMI in previous conference calls say they only attribute a minimum of the license fee for SGI. The EGC management got shafted and they knew it. We don't have access to the agreement, but this was the most detailed description in their 5/15/07 filed 10Q.
NOTE 8 SUBSEQUENT EVENT
(Continued
SGI may extend its exclusive rights with respect to “Public Lotteries” in the U.S., Canada, Mexico and Italy during the term of the License Agreement on a yearly basis beyond the first three years of the License Agreement. To effect such an extension of exclusivity, SGI must pay to EGC in cash, , the sum of at least $500,000 in license fees for the year preceding the extension (including any topping off payment by SGI if license fees paid to EGC for such year otherwise would be less than $500,000).
CLSL news was interesting, but the GTECH affiliation made the long term outlook much more enticing. I haven't added since the .60's, but at 53% of my portfolio EGMI certainly has brightened my day.
The affiliation with GTECH is interesting, but Sci Games contract locks us out of one of their major markets. Italy. I just hope they don't pull the same stunt as Sci Games and test the product in a couple markets, see a hit, than do the run around and develop their own product.
What are the catalysts you see driving the report for Oct? I've been holding for almost a year now. Wasn't sure if I was missing anything.
EGMI has grown to be almost 50% of my portfolio. I passed on some good opportunities to be so concentrated, but getting the dividends now. May shed some depending on my interpretation of the pending events. Keeping my eyes and ears to the ground. Was hoping for some more impressive results in the most recent reporting period, but they have done alright given the environment. I know they have promised some more news in the coming period, but the previous managers have a spotty track record on promises. Overall they have executed well enough to get us here. Still holding strong.
Seeing an ask of .219
Waiting a while for this one to come back. Thought this would run a long time ago.
From past CC's they have always mentioned impending catalysts in the near future. They have delivered sporadically on some of those catalysts. The European soccer was one of those items where they missed. Just typical, management gets excited about what they are doing and trying to keep investors informed. Sometimes they can close the deal, sometimes it slips away. I'm still excited for their future and have not let go one share. I think their product is fairly compelling, though they are bumping into stiffer competition if they move into more gaming type of features instead of instant promotional uses. To me the picture has not changed much since the CEO was added.
Nice summary. Only thing I would clarify is the distribution agreement with Sci Games. It's 3 yrs exclusive and renewable annually at Sci Games option. So they can lock out EGMI from the North American market, Mexico and Italy for an additional 10 years to 2020.