IGT - International Game Technology: Regaining Steam At Attractive Multiples

2024-06-14 08:00:00 ET

Summary

• The consumer discretionary segment could offer potential value for contrarian plays on valuation.
• International Game Technology PLC shows potential for such a valuation repricing in my view at 6.8x trailing NOPAT.
• Strong Q1 results and revised sentiment could drive multiple expansion and see ~$31 share in my view.

Investment Summary

Having just completed an extensive analysis on the S&P 500 Index sector looking at weightings versus growth projections, there appears to be a fairly pessimistic price/value calculus for the consumer discretionary sector (Figure 1). I am currently searching for contrarian plays in these kinds potentially overvalued, under-delivering segments. The casinos and gaming industry is one such domain, where 1) competition has been traditionally high with 2) slack returns and capital leading to 3) equally slack shareholder returns. With such a pessimistic view and set of economics, it mightn't be difficult to find diamonds in the rough here.

Figure 1. ...

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