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Advanced Drainage Systems, Inc. Message Board

  • investora2z investora2z May 8, 2013 7:47 AM Flag

    Resuts were not good

    The results were below expectations with the EPS coming in at $0.14 (estimate of $0.25 per share). In comparison, the EPS for Q1'12 was $0.40, and that for Q4'12 was $0.08. The revenues were slightly above estimates at $177.90 million. In Q1'12 & Q4'12, the revenues were $176 million and $157.50 million respectively. Thus, there was some improvement on a sequential basis but the YoY picture showed a decline. The investors, however, have already been rewarded with the stock nearly doubling from its 52 week lows. This is mainly because of the acquisition price of $26 offered by Scientific Games (SGMS). However, the patent infringement lawsuit filed by MGT Capital Investments (MGT) is casting a shadow on the deal. The lawsuit is potentially worth between $300 million to $4.5 billion, and SGMS seems to be a bit wary of taking on the contingent liability. SGMS would want WMS to settle the lawsuit so that the risk reduces. Investors of SGMS would not want to take the overhang of such a huge liability despite paying a 59% premium for acquisition of WMS. MGT stock was abuzz with rumors of it being approached by WMS. However, management has not confirmed or denied rumor. It is advisable to settle with MGT (if the settlement is reasonable) so that the uncertainty is reduced. In any case, the long term future of the company will now be as a joint entity with SGMS. Still, it needs to perform as a part of the business. Even SGMS results were below estimates, and it reported another quarter of losses. For WMS, the trailing P/E is getting stretched at around 24 and the forward P/E of 21.69 does not indicate much future expectations of growth. Price to sales and price to book value is still modest at 2 and 1.54 respectively. The question is, whether the growth in stock price will continue with SGMS.

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27.54-0.28(-1.01%)Jul 27 4:02 PMEDT