Sports betting company DraftKings Inc. (DKNG) has been on a roll, gaining 191.2% over the past year to close Friday’s trading session at $56.66. On April 15, DKNG and the National Football League (NFL) announced that DKNG will become an official sports betting partner of the league, and that it had extended its current relationship as the NFL’s exclusive official daily fantasy partner. However, the stock has lost more than 7% over the past month.
The stock is currently trading at an expensive valuation, which is not justified by its fundamentals and growth prospects. DKNG’s 19.92x forward EV/Sales is 1,061.7% higher than the 1.71x industry average. And the stock’s 21.58x forward Price/Sales is 1,463.6% higher than the 1.38x industry average. However, the company’s EPS is expected to remain negative in fiscal 2021 and fiscal 2022.
While DKNG may not be a good bet now, the sports gambling industry has been gaining investors’ attention owing to the increasing legalization of sports gambling across several states. So, we think it’s wise to bet on Boyd Gaming Corporation (BYD) and William Hill PLC (WIMHY), which are growing steadily and increasing their market reach.
Boyd Gaming Corporation (BYD)
Founded in 1975, BYD is a multi-jurisdictional gaming company. It operates through three segments: Las Vegas Locals, Downtown Las Vegas, and Midwest & South. The company operates 28 gaming entertainment properties located across Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio, and Pennsylvania.
On March 8, BYD and FanDuel Group announced plans to launch Stardust-branded online casinos in New Jersey and Pennsylvania, marking the iconic gaming brand's return to real-money gaming. This is expected to give BYD a significant advantage in connecting with players looking for a distinctive online gaming experience.
The company’s total revenues increased 10.7% year-over-year to $753.3 million for the first quarter, ended March 31, 2021. Its revenue from the gaming segment increased 21.2% year-over-year to $617.93 million. Its net income came in at $102.16 million for the quarter compared to a net loss of $147.56 million in the year-ago period. Also, its adjusted EPS came in at $0.93, compared to a $0.02 loss per share in the prior-year period.
In terms of forward Price/Cash Flow, BYD’s 9.35x is 41.3% lower than the 15.93x industry average. In terms of forward EV/EBITDA, the stock’s 11.68x is 3.7% lower than the 12.12x industry average.
Analysts expect BYD’s EPS to come in at $3.18 in its fiscal year 2021, which represents a 2,220% year-over-year increase. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 494% year-over-year to $776.54 million for the quarter ending June 30, 2021. The stock has gained 296.4% over the past year and closed Friday’s trading session at $66.15.
BYD’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Growth, and a B grade for Sentiment and Quality. Within the Entertainment - Casinos/Gambling industry, BYD is ranked #2 of 31 stocks.
To see the additional POWR Ratings for BYD (Stability, Value, and Momentum), click here.
William Hill PLC (WIMHY)
Based in London, WIMHY is a sports betting and gaming company that provides sports betting and gaming services internationally. It operates through retail, online, and U.S. segments. The company operates licensed betting offices (LBOs) that offer sports betting services on horse racing, football, greyhounds, and other sports.
The company launched its mobile and online sports book in Tennessee in March, marking the 11th state where its highly rated app is available to sports bettors. It offers a seamless experience that makes it easy and quick to make a sports wager and gives Tennessee sports fans a broad and deep array of markets and bet types, including live, in-game wagering.
WIMHY’s net revenue in fiscal 2020 was adversely impacted by the disruption of live sporting events thanks to the COVID-19 pandemic. However, its online segment revenue increased 9% year-over-year. It also generated 36% of its revenue from outside the U.K. in fiscal 2020, which is a result of it expanding its global market reach.
Analysts expect WIMHY’s revenue to increase 15.9% year-over-year to $2.40 billion in fiscal 2022. The stock has gained 164.3% over the past nine months and closed Friday’s trading session at $14.80.
In terms of forward EV/Sales, WIMHY’s 1.99x is slightly higher than the 1.71x industry average. In terms of forward EV/EBITDA, the stock’s 21.33x is slightly higher than the 12.12x industry average.
WIMHY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. It has an A grade for Quality, and B grade for Stability and Value.
We have also graded WIMHY for Growth, Momentum, and Sentiment. Click here to access all WIMHY’s ratings. WIMHY is ranked #1 in the same industry.
BYD shares were unchanged in after-hours trading Monday. Year-to-date, BYD has gained 57.15%, versus a 12.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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