No. of Recommendations: 2
The overall addressable market for global online gambling is currently expanding at a CAGR of nearly 12%, at least according to this source:
https://www.grandviewresearch.com/horizon/outlook/... . If Evolution AB as B2B supplier to this market can match or exceed this industry growth, the recent dividend cut becomes a compelling reason to buy the stock.
The math is straightforward: when a business consistently generates a Return on Invested Capital (ROIC) of 30%+, every dollar paid out as a dividend is a dollar that cannot be reinvested at that elite rate. Chris Mayer, author of "100 Baggers" and a long-time supporter of Evolution, was historically critical of the company’s 50% dividend payout policy, viewing it as a "leak" in the company’s compounding machine.
While I believe Evolution is well-positioned to reignite growth—particularly through expansion in the U.S. and Latin America—we must acknowledge that ROIC will likely face slight compression. This is a natural consequence of the higher "cost of doing business" today, driven by the shift toward localized studios, increased cybersecurity requirements, and the regulatory complexities of new markets (especially in the U.S.).
