CryptoLogic Limited (USA) (CRYP)

fauxtr8r (< 20) Submitted: 8/25/06 9:26 PM : Start Price: $23.33 CRYP Score: -54.05

CRYP has been a quarterly outperformer for 2+ years. The company has solid fundamentals, and seems to be printing money. With a topline growth rate of >35% and Net Profit of nearly 25% the PE Ratio of 12 is laughable. My target in the short-term is for the pending legislation to expire unpassed and for CRYP's PE to correct itself...I believe the fundys can support a PE of at least 18 even in a downtrending market. The potential downside is aforementioned pending legislation in the Senate meant to put a freeze on all internet gaming in the US (as opposed to just sports betting which Cryp is not affiliated with). I happen to believe that this bill will not be passed since the bankers have recently come out against it due to a large burden being placed on them to regulate credit card payments being used for online gambling purposes. Also, more than 65% of CRYP revenues are from non-US sources making them a nice takeover target in the event of passage of the Goodlatte Bill. Additionally, if I am wrong and the bill passes, the industry may suffer a sharp decline in the short-term (double-down opportunity) followed by a longer-term realization that online gaming activities simply cannot be effectively policed. I am currently, cautiously accumulating this stock on dips below $24.

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