Gathering New Information about Stocks, Health, and Sports

Introduction

Boyd Gaming Corporation (BYD) is a $3.33 billion company in the casino and gaming industry. Market capitalization competitors in this industry include Penn National Gaming, International Game Technology, and Scientific Corporation. The casino and gaming industry is up 30.12% over the past year compared to the S&P 500, which is up 5.08% during the same period. Over the past month the industry has been down 7.66%, while the S&P 500 has been down 6.29%. Strong recent earnings from this industry helps contribute to strong potential for this industry grow. Specifically, Boyd's growth and valuation illustrate the potential for a strong earnings report next quarter.

Business

This section describes what Boyd does. According to Reuters, Boyd "is a gaming company that wholly owns and operates 16 casino facilities, which are located in eight gaming markets in five states in the United States." Boyd derives most of its revenue (74%) from its gaming operations. The company also operates in four specific areas: Las Vegas Locals, Downtown Las Vegas Properties, Central Region Properties, and Borgata.

Specific to the Las Vegas region, Boyd's local hotels and casinos include the Gold Coast, the Orleans hotel, and the Suncoast hotel. These hotels consist of amenities including restaurants, bars, fitness centers, movie theaters, and bowling allies. These properties are all located near the Las Vegas Strip. Moreover, Boyd, through its Hawaiian travel agency, tries to operate six charter flights from Hawaii to Las Vegas every week. The customers are able to enjoy the Las Vegas activities and stay at Boyd hotels.

         The medical devices segment "develops, manufactures, and markets a diverse line of breast implants." These products have been very successful worldwide, and Allergan has continued to spend more cash on capital for further safety and improvement results. In addition to breast augmentation, Allergan "develops, manufactures, and markets several devices for the treatment of obesity." Used as an alternative to gastric bypass surgery or stomach stapling, the company's product, LAP-BAND, is used for long term obesity treatments. Allergan also has a product to help with urinary incontinence.

Growth

         Allergan is growing at an excellent rate. Revenue, according to Reuters, was $3.06 billion the past fiscal year. This number was 29.81% higher than revenue a year prior. The percentage increase was higher than Allergan's five year average of 20.57% and also higher than the industry's average at 24.38%. Out of Allergan's three main market-cap competitors, none of Biogen (14.54%), Forest Laboratories (14.11%), nor Genzyme (18.60%) had stronger revenue growth. However, growth did not stop at revenues. Earnings were incredible over the past fiscal year for Allergan as well. Earnings in one year grew 386.58%. This number is dramatically higher than the industry's average growth of 15.21%. In addition, the earning's growth was higher than Biogen's 256.74% increase, Forest Laboratories' 28.72% decrease, and Genzyme's 66.46% decrease. Allergan's growth was outstanding last year, and given historical records, Allergan will continue to see such phenomenal growth.

         However, strong earnings means strong cost controls. In the past fiscal year, Allergan reported gross margins, operating margins, and net profit margins of 82.43%, 18.33%, and 12.98% respectively. These figures are all higher than the five year average respective margins of 81.69%, 11.21%, and 6.29%. Moreover, these figures are also higher than the industry's averages of 69.14%, 13.10%, and 7.08% respectively. And to further entice investors, Allergan's gross margins are higher than Forest Laboratories and Genzyme. The company's operating margins are higher than Genzyme's 4.41% margin, and Allergan's net profit margin is higher Genzyme's 3.67%. Strong revenue and great management control is a large reason why Allergan is an attractive purchase.

         Moreover, when all these numbers are consolidated and referenced to the balance sheet, investors can realize Allergan's real potential. The company's ROE at 14.38% means that for 14 cents is allocated to every dollar of shareholder equity. This is a great figure compared to the industry's average at 4.44% or Allergan's five year average of 10.61%. In addition, Allergan's ROE is also higher than its market-cap competitors. Biogen only supports a 9.17% ROE and Genzyme only sees a 2.21% figure. Moreover, Allergan's ROA of 8.06% and Allergan's ROI of 8.94% are both above the industry's average and above most market-cap competitors. Allergan is a strong company.

Valuation

         Given Allergan's high ROE, there is obviously a lot of optimism regarding this stock. In this condition, it is clear that the company may be over priced compared to the industry. Currently, the biotechnology and drug industry has a earnings multiple of 29.67 and a price to sales ration of 7.78. Allergan's future respective multiples stand at 30.12 and 5.23. These numbers are higher than the industry average, but for good reason. Investors realize that there is strong potential for growth in Allergan and are paying the premium now to receive high gains in the future. Several indications support this argument including a high ROE and increasing margins. If this company continues to beat analyst expectations, Allergan will have tremendous potential for share price growth.

Efficiency

         Allergan is efficient. The company's receivable turnover of 8.30 is comparable to the industry at 8.55. This means every 44 days, Allergan receives cash for selling goods. Asset turnover at 0.62 also strong compared to competitors like Biogen and Genzyme. This number means that Allergan makes good use of buying and selling its assets to generate revenue. Moreover, Allergan has more than enough assets to cover its liabilities. The most recent current ratio of 3.44 illustrates the company's solvency. The company's debt to equity ratio of 0.45 is also supportive of the option of liquidity. Some investors may question no risk equals no growth, but with such strong revenue and earnings results, there may be no need to assume too much risk.

         Moreover, Allergan provides a generous dividend yield. The company's 0.31% yield is higher than Genzyme's, Forest Laboratories, and Biogen's, all who offer no dividend. Institutional investors have recognized the benefits of Allergan's dividend yield and other fundamentals. Currently, institutions own 93.85% of all Allergan shares. Since the institutional investors have a larger gross amount of capital to lose compared to the retail investor, a high institutional percentage illustrates confidence in the stock's ability.

Technical Analysis

         Allergan has performed fairly well share-price wise. In 2007 the company's share price is up 10.37%, despite bearish economic news the second half of the year and huge price fluctuations. The company was only up 2.79% in 2006, but had not experienced a negative calendar year since 2002 (a recession year) before 2006. Interestingly, since 2003 up to November 2007, Allergan's share price is up 102% for an annual growth rate of 21%.

         More specific to the current month, Allergan illustrates strong technical signals. The 50 day SMA and 50 day EMA are both ready to converge�a usual bullish signal, especially when compared to other signals. Parabolic SAR is above the current share price. Moreover, the company is a little undervalued compared to the RSI index at 52 and the fast stochastic at 42, but it is better to be an advocate of fundamental valuations before technical valuations. Therefore, while now is not the ideal time to purchase shares of Allergan according to technical analysis, purchasing shares will still produce strong long terms gains.

Conclusion

         Allergan is a great acquisition for any portfolio. The company's business model and fundamental analysis are both strong. It is very rare to find a company that has both strong valuation and growth, so it is wise to take advantage of these situations as they arise.

-Dennis Biray
November 9th, 2007