IGT - Morningstar likes International Game Technology
International Game Technology
IGT designs and manufactures computerized gaming equipment (primarily slot machines), network systems, and licensing and services for the casino gaming industry. North American operations contributed 77% of consolidated revenue in fiscal 2007.
What Gives It an Edge: Morningstar analyst Bradley Meeks believes International Game Technology benefits from a wide economic moat, as evidenced by its 70% share of the slot machine industry. IGT derives its advantages from its product-development capabilities (spending nearly 4 times more than its next competitor), and significant barriers to entry in the industry, including time-consuming and costly local and federal gaming regulatory requirements, a wealth of patents, and significant economies of scale. Further making Meeks’ case for a wide economic moat, IGT is extremely profitable with operating margins in the mid-30% range, and the firm converts an average of 18% of revenues into free cash flow.
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