Share of the week: This gamble paid off

Miners have had a cracking week. They hog every spot in the FTSE 350's top 10 risers, led by Anglo American, up 17%. However, the sector tends to ebb and flow with metal prices and the dollar, which are out of their control. It's why online casino operator 32Red, up 14%, gets the nod this time.

We knew results for the six months to June would be good, the company told us in July. And this week, 32Red confirmed that half-year net gaming revenue (NGR) surged by 63% to a record £30.4 million, generating pre-tax profit of £2.5 million and adjusted earnings per share (EPS) of 4.58p.

"Current trading remains strong with like-for-like NGR up 4% on very strong comparatives in the second half to date," said chief executive Ed Ware, "the board remains confident of meeting its expectations for the full year."

This is particularly pleasing given 32Red was one of the six hot stocks for 2016 tipped back in December. Then, the share price was 113p. Now, it's 152p, a three-month high, although it peaked near 160p Friday.

That's great news. So is a deal to extend a contract with Microgaming for another five years on "innovative commercial terms". It's also extended an exclusive licence with ITV to operate Ant & Dec Saturday Night Takeaway and I'm a Celebrity...Get Me Out Of Here! online slot machine games.

Numis Securities thinks 32Red, which sponsors Leeds and Rangers football teams, will make £68 million of revenue in 2016 and £10.4 million of cash profit, up 39% and 121% respectively. Look for £82 million and £15.3 million next year, an 11% upgrade from previous estimates.

Analyst Richard Stuber thinks a price/earnings (PE) ratio of 9.4 times 2017 estimates, 5.9 times enterprise value/cash profit, and free cash flow of 12% is "too great a discount to the gambling sector".

He thinks the shares will one day be worth 200p.

 This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.