Could Cash Machine Light & Wonder Stock Be Your Next Buy?
Here is why we think Light & Wonder (LNW) is worth a look.
- Cash Yield: Not many stocks offer free cash flow yield of 5.4%, but Light & Wonder stock does
- Fundamentals: 3-Year average revenue growth of 11.7% and operating margin of 22.4% show reasonable fundamentals
- Valuation: LNW stock currently trading at 35% below 2Y high, 12% below 1M high, and at a PS lower than 3Y average.
Free Cash Flow Yield refers to free cash flow per share / stock price. Why it matters? If a company produces high amount of cash per share, it can be used to fuel additional revenue growth, or simply paid through dividends or buybacks to shareholders. For quick background, Light & Wonder provides technology-based products and services for gaming and lottery industries, including gaming machines, lottery products, player loyalty programs, and interactive marketing campaigns globally.
Is holding LNW stock risky? Of course it is. High Quality Portfolio mitigates that risk.
| LNW | S&P Median | |
|---|---|---|
| Sector | Consumer Discretionary | – |
| Industry | Casinos & Gaming | – |
| Free Cash Flow Yield | 5.4% | 4.1% |
| Revenue Growth LTM | 3.9% | 5.6% |
| Revenue Growth 3YAVG | 11.7% | 5.3% |
| Operating Margin LTM | 24.7% | 18.8% |
| Operating Margin 3YAVG | 22.4% | 18.2% |
| LTM Operating Margin Change | 1.1% | 0.2% |
| PE Ratio | 17.6 | 23.7 |
But do these numbers tell the full story? Read Buy or Sell LNW Stock to see if Light & Wonder still has an edge that holds up under the hood.
That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure
The Point? The Market Can Notice, And Reward
The below statistics are from high FCF yield selection strategy between 12/31/2016 and 6/30/2025. The stats are calculated based on selections made monthly, and assuming that a stock once picked, can not be re-picked for next 180 days.
- Average 6-month and 12-month forward returns of 10.4% and 20.4% respectively
- Win rate (percentage of picks returning positive) of about 74% for 12-month period
- Not over dependent on market crashes. During non-crash periods as well, this strategy has 12-month average return of nearly 18% with 70% win rate.
But Consider The Risk
That said, LNW isn’t immune to big drops. It fell about 74% in the Global Financial Crisis and dipped 76% during the 2018 correction. The Covid pandemic hit even harder, knocking it down roughly 86%. Even the inflation shock saw a pullback of over 53%. So, while there might be strong fundamentals, sharp market swings can still take a heavy toll.
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read LNW Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
Picking winners on a consistent basis is not an easy task – especially given the volatility associated with a single stock. Instead, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.