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By Chuckmonster on Tuesday, 19th July 2005 8:27pm
  » filed under Las Vegas  comments: 0

    Follow @vegastripping

Party Gaming is extremely profitable. Profits in 2004 were $391 million on over $600 million in revenue. For the first quarter of 2005, profit was an astonishing $128 million on $222 million in revenue, for a net margin of 58%.

The company went public on June 27, at an initial price of 116 GBP ($204), giving it a market cap of $8.5 billion. Today it sits at 149 GBP, or $262. Is the business worth that much? At the current run rate of $500 million in profit on $888 million in revenue, you're looking at a company with earnings growing at about 26% and revenue growth of 46%. Slap a 26 P/E on that half-billion in profits and that's a $10 billion market cap. I'd say you're looking at a fairly priced company -- in an industry that's showing tremendous growth and popularity. More online poker sites are lining up for their IPOs.

There are two possible downsides here. One is that poker will turn out to be a fad. I'm becoming less convinced of that. If it does, we'll see it when entries into the major tournaments flatten out or decline.

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