Light & Wonder Inc Chess Depository Interest LNW

Morningstar Rating
A$128.15 +1.84 (1.46%)
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Company Report

Gaming Machines Are Crucial to Light & Wonder's Fortunes

Light & Wonder has significantly simplified its business by divesting noncore lottery and sports betting assets. It is now a more focused entity, cut in much the same image as dominant competitor Aristocrat, with operations across the social casino space, i-gaming, and electronic gaming machines. Most of Light & Wonder's revenue is derived from electronic gaming machines. Within this segment, revenue comes both from leased machines, which attract a fee per day or a percentage of the wagered amount, and outright sales. To maintain share over the long run in the fiercely competitive EGM market, manufacturers need to consistently deliver new, high-quality games that keep consumers engaged and maximize revenue for gaming venues. This requires continuous spending on research and development. Relative to Aristocrat, Light & Wonder spends a lower percentage of revenue on R&D. As a result, we expect it will be difficult to capture a material, maintainable incremental share in the EGM market. But we do not expect Light & Wonder to cede share to smaller players either, as its R&D spending is multiples of most of its smaller competitors.

Price vs Fair Value

LNW is trading at a LOCK|kwY<#y! premium.
Price
A$128.15
Fair Value
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Uncertainty
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1-Star Price
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5-Star Price
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Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

Stringent regulatory licensing requirements create barriers to entry for new players, protecting the market share of Light & Wonder and other incumbents.

Bears

Regulatory tightening of land-based gaming, particularly in Australia, may dampen demand for Light & Wonder’s electronic gaming machines.

News

Trading Information

Previous Close Price
A$126.31
Day Range
A$127.13–128.71
52-Week Range
A$96.79–193.00
Bid/Ask
A$124.00 / A$129.00
Shares Outstanding
74.78M
Market Cap
A$9.58B
Volume/Avg
386,203 / 249,304

Key Statistics

Price/Earnings (Normalized)
12.87
Price/Sales
2.11
Dividend Yield (Trailing)
0.00%
Dividend Yield (Forward)
0.00%
Dividend Payment Schedule
—
Total Yield
12.24%

Company Profile

Light & Wonder is principally an electronic gaming machine manufacturer, selling machines to pubs, clubs, and casinos. The firm is licensed in most jurisdictions, allowing gambling globally. Light & Wonder is one of the three largest players in the space, along with International Game Technology and Aristocrat Leisure. SciPlay, about one-fourth of revenue, develops and distributes casual mobile games, principally in the social casino niche. The more nascent i-gaming business sits between these two businesses, providing digital content and capabilities to real-money gaming providers.
Sector
Consumer Cyclical
Industry
Gambling
Stock Style Box
Small Core
Total Number of Employees
6,800

Competitors

Valuation

Metric
LNW
DKNG
WYNN
Price/Earnings (Normalized)
12.8753.2516.02
Price/Book Value
22.4918.10—
Price/Sales
2.111.651.01
Price/Cash Flow
8.0927.325.07
Price/Earnings
LNW
DKNG
WYNN

Financial Strength

Metric
LNW
DKNG
WYNN
Quick Ratio
1.100.690.84
Current Ratio
1.731.020.91
Interest Coverage
2.05−3.522.03
Quick Ratio
LNW
DKNG
WYNN

Profitability

Metric
LNW
DKNG
WYNN
Return on Assets (Normalized)
9.10%1.85%3.62%
Return on Equity (Normalized)
128.34%11.60%—
Return on Invested Capital (Normalized)
15.24%4.30%8.42%
Return on Assets
LNW
DKNG
WYNN

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Morningstar Rating for Stocks
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Economic Moat
Market Cap
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LOCK|fs?F?GFZLOCK|mZ@sR$14B
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LOCK|v>^xsCLOCK|PW!KX$10B
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Allwyn AG ADR
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—LOCK|TX@$F$10B
The Lottery Corp Ltd
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—LOCK|r?$$8B
Light & Wonder Inc Ordinary Shares
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LOCK|!Rq??hLOCK|<?%$7B
Lottomatica Group SpA ADR
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—LOCK|X<&j$6B

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