Evolution AB (EVVTY): The Best Stock You've Never Heard Of

50% Net Income Margins Trading at 10 Times Earnings

As of 12/22/25 this is my largest holding. About 40% of my portfolio. This is not financial advice. Do your own research. Investing in stocks is risky.

Investment Thesis

Imagine you found a company that serves as the essential “utility” for the fastest-growing sector of the gambling world. The clear market leader with over 60% of the market share in business to business (B2B) Live Dealers market. It has no expensive marketing budget, no need to burn billions on “free bets” to acquire users and operates with net income margin around 50%.

Looking at the numbers, the growth is staggering. In 2019, this company generated $428M in revenue. By the end of 2024, that figure surpassed $2.57B. That is a compound annual growth rate (CAGR) of roughly 43% over five years. Management has stated their goal is to grow revenues twice as fast as the online gambling market. While this might sound ambitious, they have crushed these goals he previous 5 years where the market grew by about 11% a year compared to Evolutions 43% CAGR. With many growth opportunities in the United States and abroad the market is again expected to grow 10% or more the next 5 years putting Evolutions revenue growth goals over 20% per year.

The company’s capital allocation is also superb. They pay out at least 50% of net income out as dividends which at 50% net income margins this equated to 25% of the revenue. Then they return all excess cash not needed for the business back to shareholders. With a capital light business this ends up being most of the net income. In 2024 they bought back 6 million shares or about 3% of the company. The first 9 months of 2025 they have bought back 8 million shares or about 4% of the company.

Summary:

· Clear market leader with 60% market share

· 5-year revenue growth of 43% CAGR

· 50% Net Income margins

· Pays out 25% of revenue as dividends

· Committed to repurchasing stock with excess cash

· Many growth opportunities, the online gambling market is expected to grow 10% a year through 2030

If you saw a high-quality, dominant market leader growing at that speed with those margins, what would you guess it trades at? In today’s market, you’d expect a P/E of 30x or higher. It’s currently trading at roughly 10x earnings. In 2024 the company’s net income was about $1.45B the company’s current market cap $13.4B

Why for the disconnect? The company’s revenue growth has stalled in 2025. Through the first 9 months of the year revenue is flat up just 1.5%. The third quarter was the companies first ever year over year revenue decline. While Evolution’s U.S. market is firing on all cylinders growing in the mid-teens. Revenue is flat primarily from decline in Asia and Europe. Management has traded short-term revenue growth for long-term security by aggressively fighting cyber-piracy and tightening European compliance. Even with these headwinds, the company maintains its 50% net income margin, proving that the business model is resilient even when growth hits a speed bump. Still long-term management’s goal is to grow by a factor of two compared to the online gambling market which is projected to grow at 11% a year the next 5 years.

Evolution AB (EVVTY) is currently being priced by the market as a “broken” growth story due to cyber piracy in Asia and temporary regulatory headwinds in Europe, but the underlying business remains a powerhouse. Trading at 10 times earnings which is an earnings yield of 10%, paying almost a 5% dividend has bout bought back 4% of the stock in the first 9 months. This is an investment that literally does not need to grow to be satisfactory. If earnings just stay steady dividends and buybacks alone could make this a 10% a year return stock. However, this is a company that grew 40% a year from 2019-2024.They have hit a rough patch in 2025 growing just 1.5% but management’s goal is to still grow twice as fast as the market which would be 20% growth. I’m not counting on Evolution to hit this goal in my analysis, but I would not count them out, they have many growth opportunities. One giant opportunity being the United States with Igaming legal in only 7 states.

So, the question is what is the stock currently worth? With the S&P 500 at 31 times earnings and the 10-year treasury rate at 4%. I am willing to pay at least 20 times earnings for a business like this and believe this is still applying a large margin of safety. With $1.45B in net income in 2024 I am willing to buy the company for $29B or $143 per share. With the stock at $67 this is quite an opportunity.

Business Overview

Evolution operates as the central infrastructure provider for the digital casino industry, delivering a comprehensive suite of gaming products that includes high-definition live dealer tables, digital online slots, and immersive game shows. Their portfolio spans everything from classic Blackjack, Roulette, Baccarat, and Craps to world-famous slot titles through acquired brands like NetEnt, Red Tiger, and Big Time Gaming.

The company’s primary innovation is its Common Draw technology, which fundamentally changes the economics of gambling by removing the physical constraints of a casino floor. In a traditional game of Blackjack, a table is limited by the number of physical chairs available. Evolution’s technology allows an unlimited number of players to bet on a single community hand while making entirely independent tactical decisions. For example, if two players are playing the same hand, one can choose to hit while the other chooses to stay. The dealer physically draws the next card, but the software only applies the result to the player who requested it. The player who chose to stand does not even see the subsequent cards applied to the hand, as they simply wait for the dealer’s hand to be resolved. This one-to-many model ensures that while labor and studio costs remain fixed, the revenue potential from a single table has no ceiling.

This technological lead has allowed Evolution to capture approximately 60% of the global live casino market. While some industry estimates for the broader iGaming space are lower, management’s 60% figure reflects their absolute dominance within the specific Live Dealer category, where the barriers to entry are highest. The company operates a pure B2B model, avoiding the high costs of marketing to individual gamblers by licensing its entire library of games to major operators like DraftKings, FanDuel, and BetMGM. These partners pay Evolution a commission typically between 10% and 20% of the winnings generated alongside fixed monthly fees for dedicated, branded tables. This setup results in a remarkably efficient financial engine, with gross margins consistently exceeding 60% and EBITDA margins tracking between 66% and 68%. Most impressively, the company’s focus on high-margin software and broadcast scalability allows them to convert roughly 50% of their total sales directly into net income.

Beyond standard table games, a significant driver of profitability is Evolution’s expansion into proprietary Game Shows such as Crazy Time and Monopoly Live. These titles integrate live human interaction with digital multipliers and random number generators to create an immersive, entertainment-focused experience. These games are highly valuable because they carry a significantly higher house edge than traditional Blackjack or Roulette, increasing the revenue generated per player for both Evolution and the casino operator.

Evolution’s physical infrastructure consists of a global network of massive studio hubs. They leverage large-scale facilities in lower-cost regions like Georgia and Latvia to serve international markets, while constructing specialized, regulated studios within the U.S. to meet strict state-level laws. This network allows them to quickly scale custom-branded environments that look and feel like an extension of an operator’s own brand. Ultimately, while the casino app owns the customer relationship, the players often seek out the Evolution Lobby specifically, driven by a preference for their superior production quality and the transparency of seeing a live, physical game rather than a digital simulation.

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Growth Opportunities: Brazil & United States

While Evolution’s total revenue growth has temporarily cooled to roughly 1.5% in 2025, this figure is largely a reflection of a defensive “cleanup” in Asia and Europe rather than a lack of demand. Beneath this surface-level stagnation, the company is aggressively planting seeds for its next leg of growth. The most immediate opportunity lies in Latin America, specifically Brazil. Following the full regulation of the Brazilian market in early 2025, Evolution became the first licensed supplier in the country and recently opened a state-of-the-art studio in São Paulo. This facility isn’t just a broadcast center; it is a localized hub that features native-speaking dealers and custom-branded games tailored specifically to the social and vibrant gaming culture of the region. Brazil represents one of the largest “gold rush” opportunities in the industry’s history, and Evolution is already the primary infrastructure provider for the operators entering that space.

Another transformative pillar for growth is the company’s pivot into the “omni-channel” space through its mid-2026 acquisition of Galaxy Gaming. This deal is still pending two key approvals but would unlock massive opportunities in the United States. This move allows Evolution to bridge the gap between digital screens and physical casino floors. By owning the intellectual property for popular table game side-bets and bonusing systems used in Las Vegas and beyond, Evolution earns a royalty every time a physical card is dealt at a land-based table. More importantly, this acquisition provides 131 licenses across 28 U.S. states, significantly lowering the regulatory hurdles for future expansions. Evolution is now working to bring its most popular digital slot titles and “Game Show” formats into physical slot machines and electronic tables, creating a circular ecosystem where the online and physical worlds feed into one another.

The company is also diversifying its high-margin revenue through a massive push into the RNG (Random Number Generator) or “Slots” market. For the first time in the company’s history, the RNG segment actually outpaced Live Dealer growth in late 2025, driven by the success of acquired brands like Nolimit City and the launch of their bold new internal studio, Sneaky Slots. With a roadmap of over 110 new game releases in 2025, Evolution is leveraging its massive “One Stop Shop” sales network to distribute these high-margin digital products to every operator already using their live feeds. Because digital slots require even less physical overhead than live studios, this segment is a critical part of maintaining the company’s incredible 50% net income margin as they scale.

Finally, the North American market remains far from saturated. While major states like New York and California have yet to legalize online casinos, Evolution is deepening its footprint in established states like New Jersey, Michigan, and Pennsylvania. They are continuously opening “bespoke” studios for single partners like dedicated rooms built exclusively for Caesars or BetMGM which increases operator “stickiness” and makes it nearly impossible for a competitor to displace them. By combining this regional depth with their global “Factor of 2” ambition, Evolution is positioning itself to double its operational capacity just as the next wave of global regulation arrives.

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Competition

While Evolution holds a commanding 60% share of the global live casino market, they are not without rivals. Their two primary competitors, Playtech and Pragmatic Play, have made significant strides in recent years by attempting to replicate the live-streaming studio model. Playtech, a long-standing giant in gambling software, currently holds a market share estimated between 15% and 30%, while Pragmatic Play has rapidly climbed to roughly 25% of the live segment. However, the gap between Evolution and these challengers is defined less by revenue and more by the quality of their underlying financials. While Evolution boasts an operating margin near 60% and converts half of its sales into net income, its competitors often operate with significantly higher overhead and lower margins, as they lack the same degree of “Common Draw” scaling efficiency and proprietary game-show IP.

The intensity of this competition was highlighted in late 2025 when a multi-year legal battle revealed that Playtech had been behind a covert “smear campaign” against Evolution. Investigative reports found that an intelligence firm had been hired to pose as investors to secretly record Evolution staff in an attempt to uncover regulatory non-compliance. These findings, which led to a 34% drop in Playtech’s stock price upon disclosure, underscore the difficulty of competing with Evolution on purely technical or creative merits. Rivals have found it increasingly difficult to displace Evolution because of its “network effect” operators prefer a single integration that provides access to the most popular games, and players prefer the platform with the most professional dealers and highest production value.

Beyond the major players, a handful of smaller, regional providers like Ezugi (which Evolution acquired) and niche operators like Vivo Gaming attempt to compete on price or specialized local themes. However, these smaller firms lack the capital required to build the high-budget “Game Show” environments that now drive the majority of the industry’s growth. Evolution’s strategy of acquiring its most innovative smaller rivals, such as the 2025 purchase of Galaxy Gaming, effectively prevents new competitors from gaining a foothold. By owning the licenses and the math behind the world’s most popular side-bets and table variants, Evolution has created a “regulatory fortress” that makes it nearly impossible for a new entrant to offer a comparable library of games to major operators like FanDuel or BetMGM.

Ultimately, while the market is becoming more crowded, Evolution remains in a class of one. Their dominance is rooted in the fact that they have already achieved the scale that their competitors are still spending heavily to reach. Even as total revenue growth for the sector sits at a steady 10-12%, Evolution’s established infrastructure allows them to extract more profit from every dollar wagered than any other company in the space. As long as they maintain their 50% net income margin and continue to outpace the industry in technical innovation, the “crown” of the live casino world appears secure, leaving competitors to fight for the remaining, less profitable segments of the market.

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Risks: Asia & Europe

The primary risk for Evolution isn’t found in its competition but in the evolving global regulatory environment. As a B2B provider, Evolution’s greatest vulnerability lies in the “gray market” status of many regions. While the company is aggressively expanding its regulated footprint, analysts estimate that between 55% and 60% of its total revenue still originates from unregulated markets. This exposure creates a “regulatory overhang” where a sudden legislative shift in a major region can lead to immediate revenue volatility. This risk became reality in 2025 as the company initiated a proactive “ring-fencing” strategy in Europe and the UK. After a review by the UK Gambling Commission found that Evolution’s games were accessible via unlicensed operators, the company took the self-initiated step of geo-blocking additional markets across the continent. While this moved the company toward a more stable, fully compliant foundation, it resulted in a multi-quarter revenue dip as they intentionally walked away from high-margin but legally ambiguous traffic.

The most significant current headwind is concentrated in Asia, where the company is navigating a complex “cyberwar” alongside shifting local laws. In the Philippines, the government officially enacted the Anti-POGO Act of 2025, a landmark law that permanently bans all offshore gaming operations. This legislative crackdown, combined with a surge in sophisticated cyber-piracy where illegal operators steal live feeds to offer unlicensed games forced Evolution into a defensive crouch. Management admitted in late 2025 that their security countermeasures had been “over-extended,” unintentionally blocking legitimate players and leading to a 6.5% year-on-year revenue decline in the Asian region. This highlights the “double-edged sword” of Evolution’s dominance: the more essential their games become, the more they must spend to defend their intellectual property and comply with increasingly strict local mandates.

Ultimately, management views these short-term hits to growth as the price of long-term survival. By “cleaning up” their player base in Europe and aggressively fighting piracy in Asia, they are attempting to derisk the business before the next major wave of legalization in markets like Brazil and the United States. Even with these regulatory resets, Evolution has maintained its signature 50% net income margin, proving that the business remains an efficient cash-flow machine. However, for investors, the central question remains whether the company can successfully transition its massive gray-market revenue into fully regulated channels without sacrificing its industry-leading profitability. The current 10 times earnings valuation suggests that the market is still pricing in the uncertainty of this transition, waiting to see if the “factor of 2” growth can overcome the friction of global regulation.

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How Big Is The Moat? Huge

Warren Buffett often talks about the moat of a company. Every business is like a castle and in order to protect the castle you need a strong moat to keep competitors from storming the castle and taking your customers away.

Hamilton Helmers book 7 Powers takes Buffett’s castle and moat idea and breaks it down into seven specific strengths called powers. According to Helmer, every lasting business needs at least one of these powers. If it doesn’t have one, competitors will eventually wear it down and eat away at its profits. The more powers a company has the bigger and stronger their moat is.

The seven strategic powers are:

• Scale economies: producing at lower cost as volume grows

• Network effects: products that become more valuable as more people use them

• Counter-positioning: taking a strategy incumbents can’t easily copy

• Switching costs: barriers that make customers hesitate to leave

• Brand: emotional connection and trust that support pricing power

• Cornered resource: exclusive access to something valuable

• Process power: unique ways of operating that are hard to replicate

Scale Economies

Evolution’s most obvious power is its ability to spread massive, fixed costs across an infinite number of users. The cost of building a high-end 4K studio, paying a professional dealer, and managing the lighting and audio is relatively fixed. In a physical casino, you need a new dealer for every seven seats; at Evolution, that same dealer can serve 700,000 players via their “Common Draw” technology. This creates a massive cost advantage: as Evolution grows, their unit cost per player plummets toward zero, allowing them to outspend rivals on game production while still pocketing half of every dollar as profit.

Network Economies

While often thought of as a social media power, Evolution enjoys a powerful B2B network effect. As more major operators like FanDuel and BetMGM join the Evolution network, the company gains more data and more capital to invent complex “Game Shows.” These exclusive titles create a “must-have” lobby for players. Because the players want these specific games, every new casino operator is forced to carry Evolution just to remain relevant. This creates a virtuous cycle where Evolution’s value to a new casino increases specifically because so many other casinos (and players) are already using it.

Counter-Positioning

Evolution’s early success was built on counter-positioning against traditional land-based casino giants. When companies like MGM or Caesars were focused on protecting their multi-billion dollar physical assets and hotel revenues, Evolution was building a “capital-light” digital infrastructure. The physical giants couldn’t easily copy Evolution’s model without cannibalizing their own high-margin foot traffic and expensive real estate. By the time the legacy players realized the market was moving to mobile, Evolution had already secured a ten-year lead in the technical and regulatory infrastructure required to stream live games.

Switching Costs

For a casino operator, the “Evolution Lobby” is deeply integrated into their technical stack and their customer experience. Switching to a competitor like Playtech or Pragmatic Play isn’t just a matter of changing a logo; it requires a massive technical migration and, more importantly, risks a “player revolt.” Because gamblers develop a passionate loyalty to Evolution’s specific dealers and the high production quality of games like Crazy Time, an operator who removes Evolution risks losing their highest-value customers to a rival. This creates a “sticky” relationship that gives Evolution significant pricing power over its B2B partners.

Branding

In an industry where players are naturally skeptical of “rigged” digital algorithms, the Evolution brand stands for transparency and trust. While the end-user might be playing on the DraftKings app, they are looking for the Evolution-branded interface because it represents the “Gold Standard” of fairness. Seeing a real human shuffle real physical cards in a professional studio provides an emotional assurance that digital simulations cannot match. This “stored trust” allows Evolution to charge a premium commission to operators who want to offer their players the most reputable experience on the market.

Cornered Resource

Evolution’s most significant cornered resource is its “Regulatory Fortress” and its human capital. Their 2026 acquisition of Galaxy Gaming would effectively corner the market for essential table game licenses and side-bet intellectual property in the U.S., a resource that a new competitor simply cannot buy or replicate. Furthermore, their product team, led by figures like Todd Haushalter, acts as a “creative monopoly.” They have consistently invented the industry’s most profitable game formats, and since these “Game Show” mechanics are proprietary, no other company can legally offer the exact same experience.

Process Power

The sheer operational complexity of running 1,700+ live tables in 4K across dozens of time zones and languages is a massive barrier. Evolution has spent nearly 20 years perfecting the “shuffler-to-screen” pipeline, ensuring zero-latency streaming and absolute game integrity 24/7/365. This isn’t something a competitor can simply buy off the shelf. It is a deeply embedded “Process Power” consisting of proprietary software, specialized dealer training academies, and custom-built broadcasting hardware that allows Evolution to operate at a scale and reliability that their rivals have proven unable to match, as seen by the significant margin gap between them.

Conclusion

It is extremely rare for a company to have all 7 powers but I believe Evolution does. Evolution is a giant castle with a moat so wide and so deep it seems impenetrable. Which explains the 50% net income margins and 60% market share.

Financial Review and Valuation

Evolution’s financial profile has transformed from a high-growth disruptor into an industrial-scale cash machine. In 2019, the company was generating $428M in revenue; by the end of 2024, that figure had ballooned to over $2.59B. Even more impressive is the scalability of the bottom line, with net income growing from $176M to over $1.45B over the same period.

Revenue has increased more than 500% in five years, while net income has increased by over 700%. This growth trajectory represents one of the most efficient scaling stories in the global market, driven by the shift toward digital live-dealer gaming and Evolution’s ability to maintain a 50% net income margin as it scaled.

There has been quite a disconnect between the growth of the company and the stock price. While revenues have increased 500% the stock is down 30%. Presenting a wonderful opportunity to investors.

Recently, however, the “hyper-growth” phase has faced significant friction. Through the first nine months of 2025, revenue growth has cooled to just 1.5%. This slowdown is largely due to self-inflicted and external headwinds in Asia, where the company over-extended security countermeasures against cyber-piracy, unintentionally blocking legitimate players. While the U.S. and Latin American markets continue to deliver double-digit growth, the drag from Asia has caused the stock to trade at multi-year valuation lows.

Despite the temporary top-line stagnation, the company’s “fortress” balance sheet remains intact. Evolution is essentially debt-free and continues to generate exceptional free cash flow. Management has used this cash aggressively to reward patient shareholders, completing a $468M share buyback in 2024 and authorizing another $585M for 2025. Total shares outstanding have dropped to approximately 202 million as of late 2025, enhancing the earnings power of each remaining share.

Given the strength of this company even with the temporary slowdown I am willing to be modestly aggressive in my valuation. I am willing to buy the company for 20 times 2024 earnings. The company earned roughly $1.45B in 2024 and applying a 20 times earnings multiple, I value the business at approximately $29B billion. With 202 million shares outstanding, I am willing to buy the stock up to $143 per share. With the current stock trading at record-low multiples, Evolution presents an incredible value proposition for those who believe they can return to growth.

Growth Scenarios

The goal in investing is not to guess the next quarter but to estimate what a business can earn over time. For Evolution, I have set up three scenarios for how the future could unfold over the next five years.

The Bear Case (5% Growth): This assumes Evolution fails to resolve the piracy issues in Asia and faces further “ring-fencing” in Europe that offsets growth in the U.S. and Brazil. Even at a stagnant 10 times earnings shareholders would still see about 5.5% annualized returns from organic growth and buybacks.

The Base Case (13% Growth): This aligns with industry-wide digital gaming growth (11%) plus a modest “winner-takes-most” premium. It assumes Asia stabilizes, the Brazilian market launch is successful, and the company continues to retire 3–5% of its shares annually. If the earnings ratio was boosted to 20 this would be an impressive 30% CAGR.

The Bull Case (25% Growth): This is the “Factor of 2” scenario. It assumes a massive acceleration driven by the legalization of iGaming in major U.S. states like New York, alongside the successful “omni-channel” rollout of Galaxy Gaming IP into physical casinos. A return to a 30x growth multiple could lead to a 56% annualized return from current levels.

On top of these returns you need to add in a healthy dividend which is currently 4.5% and management is committed to return half of all profits back to shareholders as dividends.

Final Thoughts

Evolution represents a rare “Full House” investment a business that holds all seven powers, ranging from massive scale economies in its “one-to-many” broadcasting model to a potential “regulatory fortress” through its pending acquisition of Galaxy Gaming. While the top-line revenue has temporarily flattened to a 1.5% growth rate in 2025 due to aggressive cyber-piracy defense in Asia and regulatory tightening in Europe, the company’s structural advantages remain untouched.

The most compelling aspect of this thesis is that Evolution does not need to return to its historical 43% CAGR to be a successful investment. Because the business operates with an incredible 50% net income margin and a capital-light B2B model, it is a relentless cash-flow machine. At its current valuation of roughly 10 times earnings, the market is pricing the company as if it will never grow again, completely ignoring the long-term tailwind of global gambling legalization. Even if growth remains stagnant, Evolution continues to return massive value to shareholders, paying out 25% of its revenue in dividends and aggressively retiring shares buying back roughly 4% of the company in just the first nine months of 2025.

At $67 per share, the stock presents a massive margin of safety, as I am willing to buy the stock up to $143 per share. Investors are essentially paying a “bargain-bin” price for the indispensable utility of the digital gambling world. With the Galaxy Gaming deal expected to close in early 2026, Evolution is poised to further cement its dominance by bridging the gap between digital and physical casino floors. As temporary regional headwinds settle, the combination of organic industry growth and a potential rerating of the P/E multiple makes Evolution an incredible opportunity for patient, long-term investors.

Disclaimer

Disclosure: At the time of this writing, I hold a long position in Evolution AB (EVVTY). This article is for informational and educational purposes only and should not be construed as professional financial advice. The valuations and price targets presented (such as my “buy-up-to” price of $143) are based on my personal analysis and internal models.

Investing in individual stocks involves significant risk, including the potential loss of principal. I am not a registered investment advisor or a broker-dealer. Readers should conduct their own due diligence or consult with a qualified financial professional before making any investment decisions. While I strive for accuracy, all data is provided “as is” and is subject to change without notice.