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Can You Imagine How Jubilant Scientific Games' (NASDAQ:SGMS) Shareholders Feel About Its 201% Share Price Gain?

Simply Wall St
·3 min read

When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Scientific Games Corporation (NASDAQ:SGMS) share price has soared 201% in the last half decade. Most would be very happy with that. On top of that, the share price is up 101% in about a quarter.

View our latest analysis for Scientific Games

Scientific Games wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last 5 years Scientific Games saw its revenue grow at 5.5% per year. That's not a very high growth rate considering the bottom line. So we wouldn't have expected to see the share price to have lifted 25% for each year during that time, but that's what happened. While we wouldn't be overly concerned, it might be worth checking whether you think the fundamental business gains really justify the share price action. Some might suggest that the sentiment around the stock is rather positive.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

Scientific Games is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Scientific Games in this interactive graph of future profit estimates.

A Different Perspective

It's good to see that Scientific Games has rewarded shareholders with a total shareholder return of 68% in the last twelve months. That's better than the annualised return of 25% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Scientific Games is showing 2 warning signs in our investment analysis , you should know about...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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