Full House Resorts Building to a Possible Climb

Full House Resorts (FLL) is a gaming properties company operating out of Las Vegas with casinos all over the US. The casino stocks have been breaking out over the last year after being decimated by the recession. They've been relatively flat for awhile, but are now moving into huge catch-up climbs with MGM being a prime example. If you don't like to chase a climbing stock but want to add a good casino name, consider FLL.

The most repulsive thing about them is the debt level, which at $67 million is slightly more than their micro market cap of $52 million. I don't like debt anywhere near market cap, but if you look at the balance sheet you see a high retained earnings number with annual assets running more than twice annual liabilities. They produce good cash flow, which is leading a current off-trend dip in eps back up to a very strong trend upward:

That skyrocketing black line is the revenue, producing a price-to-sales valuation now of 0.3 with price-to-cash flow of 7.4 - about half price compared to the Dow.  Note how the market placed high potential on the business model and prospects for this company back before the recession with PEs of 70 to 90. Now as those prospects seem to be coming about with results, the market has abandoned the stock with PEs barely perceptible on the above graph.

All this makes me more conciliatory to the high debt.  In a July 30 news release, Brean Capital announced some lowered estimates, but they rate it a buy because "the firm still likes the stock given its stellar balance sheet and management experience in operating gaming properties". The technical condition is one of a stock about to make a strong move:

It has been working on a pennant formation for years and you would have to suspect the direction out of it to be up. This stock should be watched very closely, but not bought until the post-formation direction is made clear.