Maybe Shuffle Master Inc. is learning what happens when you bluff investors.
Last month, the maker of automatic card shufflers said it would buy back as much as $5 million of its stock while warning that fiscal fourth-quarter earnings wouldn’t meet forecasts. It did nothing for the stock, which plunged 15 percent the day of the announcement.
Maybe investors recalled Shuffle Master’s plan in February to repurchase as much as $5.09 million in stock, which sent its stock up 14 percent–only to discover it didn’t buy a single share.
“We need to see some evidence of a buyback before getting excited,” said Robert Evans, analyst with John G. Kinnard & Co.
This time, the Eden Prairie-based company said it really is buying stock–although it would not say how many shares it has bought so far. “This is not us trying to manipulate our stock price,” said chief financial officer Gary Griffin. “We are looking at it as an investment opportunity.”
That’s one way of looking at Shuffle Master, whose shares have fallen 43 percent from $16.50 in late May. The stock closed at $9.37 on Friday. Part of that slide owes to the company’s fiscal third-quarter earnings of 13 cents a share, below Wall Street estimates. And the results this quarter could be as much as 50 percent analyst expectations of 14 cents per share.
To boost earnings, analysts said, Shuffle Master must expand beyond its line of automatic card shufflers and the Let It Ride poker tournament in Nevada. Griffin says it’s moving in that direction, with plans to roll out its new video slot machine game, Five Deck Frenzy, next year.
Analysts said that at about 23 times this year’s earnings-per-share estimate, Shuffle Master stock isn’t overpriced.
In the end, though, as Shuffle Master is learning, buybacks don’t help stock prices in the long-term. That takes earnings.
