Penn National vs. Boyd Gaming: Which Casino Stock is a Better Bet?

Penn National Gaming, Inc. (PENN) owns and manages gaming and racing properties and operates video gaming terminals. The Wyomissing, Pa.-headquartered company also operates online social casinos, bingo, and online casinos under the iGaming name in Pennsylvania and Michigan. In comparison,  Boyd Gaming Corporation (BYD), which is headquartered in Las Vegas, Nev., operates as a multi-jurisdictional gaming company.

The gambling market is gaining traction as COVID-19 travel restrictions and social distancing mandates ease. Furthermore, over the past year online gambling has gained immense popularity. This trend will likely continue, and the online gambling market is expected to hit $112.09 billion in 2025, growing at a 12% CAGR. As well-established players in the industry, both PENN and BYD are expected to benefit significantly from the growing demand.

PENN has gained 19.4% in price over the past month, while BYD has returned 7.2%. However, BYD’s 42.4% gains year-to-date compare with PENN’s 5.5% returns. In terms of their past year’s performance, BYD is the clear winner with 121% gains versus PENN’s 41%.

But which stock is a better buy now? Let’s find out.

Latest Developments

On August 5, PENN and Score Media and Gaming, Inc. announced that they had agreed to PENN’s acquisition of SCR, a leading digital media and sports betting and technology company. PENN expects the acquisition to broaden its product offerings and drive its customer acquisition, engagement, retention strategies, and cash flows.

On June 9, BYD entered a strategic partnership with Hawaiian Airlines, under which members should earn extra benefits and rewards with Boyd Gaming's award-winning B Connected player loyalty program and the carrier's celebrated HawaiianMiles program. The partnership is expected to significantly increase players’ engagement and demand for membership.

Recent Financial Results

BYD’s total revenues increased 325.8% year-over-year to $893.60 million in its fiscal second quarter, ended June 30. Its operating income stood at $266.34 million, up 408.5% from the same period last year. Its net income grew 204.8% from its  year-ago value to $113.73 million. And the company’s EPS increased 204.2% year-over-year to $1.00.

PENN’s total revenues increased 406% year-over-year to $1.55 billion in its fiscal second quarter, ended June 30. Its operating income grew 328.5% from its year-ago loss to $377.90 million, while its net income improved 192.7% year-over-year to $198.70 million. PENN’s EPS has improved 169.2% year-over-year to $1.17.

Past and Expected Financial Performance

BYD’s EBITDA and net income have grown at CAGRs of 20.5% and 22%, respectively,  over the past three years. Analysts expect BYD’s revenue to increase 52.2% in the current year and 3.6% in the next year. The company’s EPS is expected to grow 228.9% in the current quarter, 152.2% in the next quarter, and 3,126.7% in the current year. Moreover, its EPS is expected to grow at a 10.8% rate per annum over the next five years.

In comparison,  PENN’s EBITDA has grown at a 14.2% CAGR over the past three years, while its net income declined at a 7% CAGR over the period. Analysts expect the company’s revenue to increase 61.1% in the current year and 6.3% in the next year. The company’s EPS is expected to grow 154.4% in the current quarter and 164.6% in the current year. Moreover, PENN’s EPS is expected to grow at a 263.9% rate per annum over the next five years.

Profitability

BYD is more profitable with  gross profit  and EBITDA margins of 72.96% and 33.80%, respectively, versus  PENN’s 50.67% and 25.61%.

Furthermore, BYD’s ROE, ROA, and ROTC of 28.54%, 6.51%, and 7.14%, respectively,  compare with PENN’s 19.88%, 3.96%, and 4.22%.

Thus, BYD is more profitable here.

Valuation

In terms of forward EV/Sales, PENN is currently trading at 3.74x, which is 12.6% higher than BYD, which is currently trading at 3.27x. Also, PENN’s 10.42 forward EV/EBITDA ratio  is 15.7% higher than BYD’s 8.78.

Thus, BYD is a relatively affordable stock here.

POWR Ratings

BYD has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. PENN, in contrast,  has an overall C rating, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

BYD has an A grade  for Sentiment. This is justified because  each of the five Wall Street analysts that rated BYD has rated it Buy. PENN, on the other hand, has a C grade  for Sentiment. Of the nine Wall Street analysts that rated the stock, five rated it Buy, while three rated it Hold, and one rated it Sell.

BYD has an A grade  for Quality, owing to its higher-than-industry average profit margin. BYD’s 33.80% EBITDA margin is 176.5% higher than the 12.22% industry average. PENN, on the other hand, has a B grade. This is justified because PENN’s 25.61% EBITDA margin is 109.5% higher than the industry average.

Of the 31 stocks in the Entertainment - Casinos/Gambling industry, BYD is ranked #2, while PENN is ranked #11.

Beyond what we’ve stated above, we have also rated stocks for Stability, Momentum, Value, and Growth. Click here to view BYD ratings. Also, get all PENN ratings here.

The Winner

People’s engagement in online gambling has increased substantially under the new normal. Furthermore, physical casino houses have now reopened with the easing of social distancing mandates. So, both BYD and PENN should benefit. However, we think its higher profit margins and lower valuation make BYD the better buy here.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Entertainment - Casinos/Gambling industry here.

PENN shares rose $0.03 (+0.04%) in after-hours trading Thursday. Year-to-date, PENN has declined -4.60%, versus a 22.01% rise in the benchmark S&P 500 index during the same period.

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.

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