Why Multimedia Games Holding Company Inc Shares Dropped

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: Shares of Multimedia Games were no fun for investors today, falling as much as 18% after the company posted disappointing EPS guidance in its quarterly report.

So what: The maker of gaming and video-lottery machines actually beat earnings estimates in the quarter with a per-share profit of $0.32 against expectations of $0.26, while revenue was essentially in line with the consensus, growing 22% to $50.4 million. The company finally entered Nevada in 2013, the country's largest gaming market, which helped boost revenue to new records. Still, its revenue guidance for fiscal 2014 of $217 million to $223 million skewed lower than the consensus of $221.3 million, and its EPS outlook of $1.23 to $1.27 missed the Wall Street view of $1.30.

Now what: Lower projected unit sales prices seem to have put a damper on margins. Multimedia Games sees an average selling price of $16,500 to $17,500 in 2014, compared to $18,121 in 2013, due to a change in sales mix as it expects its higher-margin TournEvent units to comprise a lower percentage of units sold. Still, the company sees overall unit sales increasing 38% to 49%, and revenue growth 15% to 18%. With increases like that and gaming laws becoming looser in New York and other locales, Multimedia Games seems to have long-term steady growth ahead of it. Today's drop looks exaggerated.

Invest like a boss
As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love. 

The article Why Multimedia Games Holding Company Inc Shares Dropped originally appeared on Fool.com.

Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story