Simple Concepts Research Group

Is Investor Optimism Returning for PlayAGS (NYSE: AGS)?

by | Oct 17, 2022 | 52 Week Lows, Consumer Discretionary, Stock Picks

playags ags stock company valuation

PlayAGS (AGS) Company Overview & Stock Price Forecast

This article provides a brief analysis and stock rating for PlayAGS (AGS) including an updated stock price target. Additional data on the company’s earnings yield, price/earnings ratio, return on invested capital and YTD performance are discussed as well.

PlayAGS Fundamentals

AGS Stock Rating

Stock Price Target: $9.61

In the section below, we discuss the earnings yield, P/E, return on invested capital and YTD performance for PlayAGS in comparison to the Hotel & Leisure industry and the S&P 500.

PlayAGS is a Micro Cap company with a Market Cap of $220.7M.

How are investors using PlayAGS earnings yield to assess the company?

PlayAGS (AGS)_ Earnings Yield in Comparison to the Hotel & Leisure Industry, S&P 500 and 10 Year Treasury Rate

The earnings yield is used to show the percentage of a company’s earnings per share. Investors typically use earnings yield to determine which assets are underpriced or overpriced relative to other variables, like sector, industry or bond yields. Simply put, the earnings yield of a company can be used to assess how expensive a company is in relation to the earnings that are generated. When valuing companies, the SIS Research Group does not utilize the inverse P/E ratio to calculate the earnings yield. Instead, we use an adjusted earning yield calculation to capture variation amongst companies (i.e. debt and tax rates).

The current earnings yield for PlayAGS is 13.59%, in comparison to 5.52% for the S&P 500 and 4% for the 10-year treasury bond. The median earnings yield for the Hotel & Leisure industry is 3.59%.

What does PlayAGS Price-to-Earnings Ratio (P/E) tell investors about the company?

PlayAGS (AGS)_ Price-to-Earnings, Price-to-Sales and Price-to-Book Value in Comparison to the Hotel & Leisure Industry and the S&P 500

The price-to-earnings ratio (P/E) is a relatively popular metric used by investors and analysts for valuing a company’s stock. The P/E ratio can be used to show how a stock’s valuation compares to other companies and the total market. Investors use the P/E ratio to determine what the market is willing to pay today based on a company’s past or future earnings. A high P/E ratio could mean that a stock’s price is too high relative to earnings, which could be a signal that a stock is currently overvalued. In turn, a low P/E ratio could indicate that a company’s current stock price is low relative to earnings. 

PlayAGS does not currently have a reported P/E. The P/E for the Hotel & Leisure industry is 38.23 and the P/E for the S&P 500 is 18.10.

What is the current Price-to-Sales Ratio (P/S) for PlayAGS?

The Price-to-Sales Ratio (P/S) looks at a company’s market cap and revenue to determine valuation. The P/S ratio is calculated by taking a company’s market cap and dividing by the total sales or revenue. The P/S ratio gives an idea of how much the market values every dollar of a company’s sales and can be effective in valuing unprofitable growth stocks or companies that are currently undergoing special situations or challenges. A lower the P/S ratio can be an indicator of good value.

PlayAGS is currently trading at a P/S of 0.84. The P/S for the Hotel & Leisure industry is 6.50 and the P/S for the S&P 500 is 2.22.

How does PlayAGS Price-to-BookRatio (P/B) compare to the Hotel & Leisure industry?

Price-to-book value (P/B) is the ratio of the market value of a company’s shares divided by its book value of equity (the value of it’s assets on the books). The book value is the difference between the book value of assets and liabilities. Typically, investors use the P/B ratio to assess if a stock is valued properly (a value of one means that the stock price is trading in line with the book value of the company). A company with a high P/B ratio could mean the stock price is overvalued as well as the converse.

PlayAGS P/B ratio is 5.30. The P/B for the Hotel & Leisure industry is 7.56 and the P/B for the S&P 500 is 3.56.

How attractive is PlayAGS Return on Invested Capital (ROIC) to investors?

PlayAGS (AGS)_ Return on Invested Capital in Comparison to the Hotel & Leisure Industry and the S&P 500

Investors use the return on invested capital (ROIC) to assess how efficient a company is at turning capital into profits. The ROIC is the amount of money a company makes on it’s investments that is above the average cost of debt and equity.

Investors can use the ROIC to provide context for metrics like the (P/E) ratio. For instance, when used in isolation a low P/E ratio could suggest a company is oversold but the decline could be because a company is no longer generating value for shareholders. Conversely, companies that consistently generate high rates of ROIC can plausibly trade at a premium compared to other stocks, even if their P/E ratios are high.

PlayAGS ROIC is currently -3.49% in comparison to 11.13% for the Hotel & Leisure industry and 9.10% for the S&P 500.

PlayAGS (AGS)_ Price Target & 52-Week Price Range

How has AGS stock performed over the past year? What is the current analyst price target?

Over the past 52 weeks, PlayAGS has traded between the range of $4.21 and $10.45.

The current Analyst Price Target for PlayAGS is $9.61.

What is PlayAGS YOY Performance in comparison to its industry and the total market?

The YOY performance for PlayAGS is -30.04%. The Hotel & Leisure industry has a YOY performance of -22.35% in comparison to the YOY S&P 500 performance of -17.64%.

PlayAGS (AGS)_ YOY Performance in Comparison to the Hotel & Leisure Industry and the S&P 500

Recent Financial Results

  • Domestic EGM Recurring Revenue Increased 1% YoY to a Record $46.2M
  • Premium EGM Installed Base Nearly Doubled YoY and Grew by 15% Sequentially
  • Domestic EGM RPD Increased 6% Sequentially; Topped $30 for the Fifth Consecutive Quarter
  • Generated $1.5M of Net Income; First Net Profit Since Q4 2019
  • Adjusted EBITDA Increased 6% Y/Y to $34.1M
  • Table Products Adjusted EBITDA Reached a Record $2M
  • On Pace to Achieve Year-End 2022 Net Leverage Target of less than 4.0x

Stock Price Target: $9.61

Company Overview

AGS Stock Rating

PlayAGS, Inc. designs and supplies gaming products and services for the gaming industry in the United States and internationally. It operates through three segments: Electronic Gaming Machines (EGM), Table Products, and Interactive Games (Interactive). The company was formerly known as AP Gaming Holdco, Inc. and changed its name to PlayAGS, Inc. in December 2017. PlayAGS, Inc. was incorporated in 2005 and is headquartered in Las Vegas, Nevada.

Be sure to add PlayAGS (AGS) to your Watch List and if you haven’t done so already. Keep it simple and always do your due diligence.

This material is provided for informational purposes only and is not financial advice. The information contained herein should not solely be used for the formation of an investment decision, whether you are a long term or short term investor.