Electronic Game Card Isn't Playing Any Games
Electronic Game Card, Inc. (EGMI) may sell electronic lottery tickets and toys, but the company is making some very serious profits.
Electronic Game Card, Inc. [[EGMI.OB]], a developer and distributor of a credit card-sized pocket game combining proprietary technology with “instant win” excitement, is quickly growing its top and bottom line with two big distribution agreements in place, while continuing to trade at a reasonable price-earnings multiple of 12.78x given its growth rates.
Electronic Game Card’s products are well-positioned to grow in the U.S. and Canada. FMM-The-Moscoe Group has signed an agreement to mass market its “Know-it-All QuizCards” and “iQuizCards” across retail stores. The six retailers included in the agreement are all household names across the U.S. and Canada totaling approximately 19,000 retail locations.
Meanwhile, Electronic Game Card is also increasing distribution in China after disclosing a confidential Memorandum of Understanding (MOU) with China LotSynergy to deliver its lottery products to the growing Chinese market in an 8-K filing with the SEC. Unfortunately, few details about this agreement are available beyond the MOU that was signed.
Last quarter, Electronic Game Card reported net income of $2,159,463, or $0.04 per share, on revenues of $2,951,095. These numbers represent revenue growth of 28.6% and earnings growth of 67.1% versus the same quarter a year ago. Meanwhile, the company’s balance sheet remains robust with a current ratio of over 10 and cash and cash equivalents of $9,687,299.
On a valuation basis, Electronic Game Card is trading at just 12.78x trailing earnings, according to Google Finance. Given its 67.1% earnings growth, this implies a price-earnings to growth ratio of around 0.2, which indicates that the firm is substantially undervalued given its growth. A fair value using this metric would be at least $2.50 per share given its growth rates.
Institutional investors understand this and are becoming increasingly interested in Electronic Game Card, which is somewhat rare for many OTC-BB listed companies. On July 10th, Manatuck Hill Partners disclosed a large 12.96% stake in a Schedule 13G filing with the SEC. This firm is a spin-off of Pequot Capital Management, which was a previous holder.
In the end, Electronic Game Card’s distribution agreements in place leave a lot of room for growth going forward. Meanwhile, the company’s cheap valuation has many institutional investors interested in the stock, which trades at a discount to its value given its growth rates. As a result, long-term investors may be interested in taking a look at this growing company.
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