Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Happy subscriber here enjoying your daily commentary. Regarding the addition of Light & Wonder to the growth portfolio, we see from the MM website that total debt / total equity for the latest quarter is 684 and other sources give a similar figure. Apart from lending institutions, we prefer debt/equity to be not much over 50. Could you comment on the high figure and is there something I'm missing in the calculation for these depository receipts? Thanks... Mike
Hi Mike,
Light & Wonder’s balance sheet appears highly leveraged because its reported equity is unusually small, not because its debt is out of control. Light & Wonder (formerly Scientific Games) underwent large asset sales, major restructuring, goodwill write-downs, spin-offs (including the sale of their lotteries business), and share buybacks. All of these reduce book equity, even if the business becomes financially healthier. This is an accounting outcome, not an operational one.
Because D/E is distorted, institutions and brokers use the following more meaningful metrics:
We covered LNW after their strong September Quarter Here it remains our preferred exposure to the global gaming sector, both online and land based.
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