Company Deep Dive: A Industry Leading Compounder Going Through An Event
Strong Margins & Cash Flow Along With Stock Repurchases
This week’s deep dive features a stock I’ve owned for a few months: a dominant player in its industry that is experiencing a temporary setback, causing it to trade at a significant discount. This is the type of post I will have behind the paywall in the future, but I am including it as free to give an example of the type of analysis to expect.
I have included a video at the end of this write up that dives into additional detail as well.
Evolution AB (EVVTY) Stock Analysis
Company Profile
Company Name: Evolution
Ticker: EVVTY
Stock Price: ~$74 USD / share
Market Cap: ~$15.5 billion
Evolution AB is a Swedish company and the world leader in online casino gaming. They have some of the best annual reports I have seen that walk through a ton of details I like to know as an investor.
What They Do
Evolution’s mission is to help casino operators succeed by providing top tier gaming experiences to their end users. They already are the global leader in online casino content. Their core products include:
Live Casino Games – These are streamed with real dealers in real time, allowing users to play blackjack, baccarat, poker, etc., from their phones in legally permitted states.
RNG Games – These include digital slots and other random number generator based experiences, though their margins are much stronger in live games.
If you're in a state where online gaming is legal and open an app like DraftKings (hypothetically), the live blackjack experience might be powered by Evolution behind the scenes. Their customers are global casino operators, some recognizable like DraftKings and MGM, others more regional.
They’ve even introduced live game shows, continually innovating with new formats. While it may seem kitschy at first glance, this is a company producing extraordinary revenue and profit.
Financial Performance
Revenue and Earnings Growth: Their financials show excellent year-over-year growth, strong margins, and prudent cost management. They’re highly efficient capital allocators.
We like to see a 10% compounding annual growth rate for revenue, ROIC, earnings, free cash flow, and book value with very low debt (some examples below). Evolution comes very close to those marks, and has no debt.
Geographic Footprint: Their biggest markets are Europe and Asia, with North America growing rapidly as regulations evolve.
Dividend Policy: As a European company, they return approximately 50% of net profit as an annual dividend.
They’re growing faster than the overall online casino industry, which already has strong tailwinds.
Share Price & Recent Events
Their share price (in USD via ADR) has declined from its 2021 peak and is now trading at a substantial discount.
So, what’s going on?
Georgian Studio Incident: In Georgia (the country), one of their live stream studios was sabotaged during a violent strike. It required police involvement and a full staff replacement.
Cyberattacks in Asia: Criminals mirrored their stream, scamming users via fake platforms, an event that created reputational and operational noise.
Despite this, Evolution addressed these issues directly and transparently in their latest report, and the core business remains healthy and growing.
Leadership & Industry Position
CEO Martin Carlesund is an industry veteran with a strong team known for creativity and operational excellence. Evolution maintains deep partnerships with global casino leaders and is regarded as the best in class.
Carlesund recently purchased approximately $7 million USD of Evolution AB stock, indicating that he believes in the future of the company.
Valuation
I believe Evolution is currently trading at approximately 50 cents on the dollar, based on conservative estimates. This reflects temporary disfavor rather than business fundamentals.
As Ben Graham said: "In the short term, the stock market is a voting machine, but in the long term, it's a weighing machine."
Even if the stock is out of favor today, its earnings and cash flow will ultimately determine its value.
Note: All numbers are in USD.
Risk Considerations
Regulatory Complexity: Especially in less regulated Asian markets, there’s a risk of funds moving into gray or black markets.
Trust Erosion: Events like cyberattacks can affect perception, but Evolution itself remains legally insulated, as casinos are responsible for compliance.
Final Take
This is a dominant company in a fast-growing industry, with top tier margins, global reach, and strong leadership. The current price reflects temporary noise, not structural issues, making it a compelling value opportunity.
The following clip is from my Libertalia Investing Course. The entire 12-week course is available at the $10/month tier (which you can cancel anytime). Enjoy!
DISCLAIMER!
Remember: This is not financial advice! I am not a financial advisor and have not considered your personal financial situation as your fiduciary. All content shared, including analysis, the Libertalia Investing Course, and discussion is for general information, educational and entertainment purposes only.
Please note that any opinions expressed here—whether by me or other participants—are solely our personal views. They should not be construed as specific financial or investing advice. Every investor's situation is unique, and you should always conduct your own research and/or consult with a licensed financial professional before making any investment decisions.
I own shares in IMKTA, GRUSF, EVVTY, PAYC, DIS, FLWS, FND, GOOGL, HHH, HPQ, LULU, LVMUY, NTDOY, OXY, POOL, PYPL, UBSFY, CZBS, DRREF, LNF, and SEG. Any mention of these or other stocks is not an endorsement to buy, sell, or hold. I may buy or sell any of these positions (or others) at any time for any reason.
Investing involves risk, including the loss of principal. Past performance does not guarantee future results.