Bally Technologies Dropped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Casino equipment-maker Bally Technologies (NYS: BYI) turned a 9% rise in revenues into a 43% plunge in profit last quarter. Upon hearing the news yesterday, investors promptly queued up to sell the stock, which is down 14% today.

So what: And that's not the worst of the news. Yesterday's report was for Bally's fiscal fourth quarter. As such, it also gave us the tally for the full year -- and it appears we're not looking at a one-quarter blip on the march to higher earnings. Profits for all of fiscal 2011 reached just $1.81 per share, a 24% full-year decline.

Now what: With the most recent data now in hand, we see Bally trading for more than 16.7 times trailing earnings -- and just 14 times Bally's revised earnings guidance for fiscal 2012. Either one of those numbers looks cheap if investors can rely on Wall Street's prediction of 25% annual long-term growth for the company. Then again, if the analysts were wrong on this quarter's earnings, who's to say they're not wrong about the growth rate, too?

Planning to stick around and see if Bally's ballyhooed growth rate is correct? Make the wait easy on yourself.Add Bally Technologies to your Fool Watchlist, and we'll keep you up to date on how it's coming along.

At the time thisarticle was published Fool contributorRich Smithdoes not own (or short) shares of any company named above. The Motley Fool has adisclosure policy. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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