Evolution Gaming: Scandinavian Sleeping Giant With Opportunities To Scale

Evolution Gaming (OTCPK:EVVTY) ("EVO") has a competitive product - its "live gambling" turnkey solution, which has been successfully competing in the mature casino and gambling market in both offline and online segments. The gambling segment has the potential to expand to up to 25% of the total market share by 2030. The superior quality and technical/innovative nature of company's product leave its competitors that mostly repeat EVO's products far behind.

Evolution Gaming has attractive financials. The company has dividend growth prospects - the current yield is ~0.5-1% and is estimated to grow to 2.5-3% by 2023. EVO's historical 5-year revenue CAGR has been ~50% and is forecasted to be ~30% across 2021-2025 horizon, while EBITDA margin is ~60% and is estimated to increase to 70% by 2023. The company has no debt burden.

Currently, Evolution Gaming may seem to have a high valuation, but it has still room for growth with FY21 PEG of ~1.3x. EVO's M&A track record, including the recent NetEnt acquisition, supports its growth thesis giving additional scalability prospects.

The company also looks attractive from the macro perspective as the US market is still sleeping on Evolution - only a modest share of US states has yet legalized live gambling. There is also a considerable growth opportunity in the Asian, African, and South American markets as analysts see these markets to account for major revenue share of EVO beginning FY23.

What's more, a secondary listing on NASDAQ with EVO adoption across American market is possible and could serve as a supplementary trigger that could push the company's share price further.

Still, there are risks associated with the stock, including the competitive nature of its business (Playtech is following EVO footsteps in new markets); legislative issues, as business is considered in a "grey" zone in some countries; and relatively low client diversification.
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