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PENN Entertainment Inc PENN

Morningstar Rating
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Stock XNAS Rating as of
Today’s Gainers
$17.50 +2.87 (19.62%)
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As of Delayed Price Closed
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Company Report

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Penn Entertainment: Investor Donerail Sees Value in Shares, and We Agree

Dan Wasiolek

No-moat Penn's shares moved 17% higher during May 31 trading, as the market cheered an activist letter from the Donerail Group, which has an investment in the casino operator. In Donerail's view, Penn's shares have underperformed peers due to the company's heavy investment in its interactive division, which Donerail complains has produced lackluster results to date. For this reason, Donerail believes Penn should relent from further capital outlays in its digital business and instead focus on its physical regional casino assets, which have produced steady results through various economic environments and could be worth $23-$30 per share assuming 2024 EBITDA multiples of 6.5 times-8 times.

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Price vs Fair Value

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PENN is trading at a 566% premium.
Price
$17.50
Fair Value
$46.00
Uncertainty
Very High
1-Star Price
$55.80
5-Star Price
$41.00
Economic Moat
Sdrj
Capital Allocation
Zqflwyxj

Bulls Say, Bears Say

Bulls

We see Penn's domestic properties and partnership with ESPN as well positioned to benefit from the more than $40 billion US sports betting and iGaming revenue opportunity by 2030.

Bears

Debt levels are elevated, which could inflate financing costs for future renovations and investment.

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News

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Trading Information

Previous Close Price
$14.63
Day Range
$15.10–17.60
52-Week Range
$13.50–29.38
Bid/Ask
$17.55 / $17.60
Market Cap
$2.67 Bil
Volume/Avg
22.9 Mil / 5.9 Mil

Key Statistics

Price/Earnings (Normalized)
12.68
Price/Sales
0.36
Dividend Yield (Trailing)
—
Dividend Yield (Forward)
—
Total Yield
3.74%

Company Profile

Penn Entertainment’s origins date back to its 1972 racetrack opening in Pennsylvania. Today, Penn operates 43 properties across 20 states and 12 brands, including Hollywood Casino and Ameristar. Land-based casinos represented 89% of total sales in 2023; 11% was from the interactive segment, which includes sports, iGaming, and media revenue. The retail portfolio generates mid-30s EBITDAR margins and helps position the company to obtain licenses for the digital wagering markets. Additionally, Penn’s media assets, theScore and ESPN (starting with its partnership launch in November 2023), provide access to sports betting/iGaming technology and clientele, helping it form a leading digital position.
Sector
Consumer Cyclical
Industry
Resorts & Casinos
Stock Style Box
Small Value
Total Number of Employees
23,333
Website
https://www.pennentertainment.com

Competitors

Valuation

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Metric
PENN
WYNN
MGM
Price/Earnings (Normalized)
 12.6817.5713.26
Price/Book Value
 0.75—3.66
Price/Sales
 0.361.530.83
Price/Cash Flow
 3.507.295.19
Price/Earnings
PENN
WYNN
MGM

Financial Strength

Metric
PENN
WYNN
MGM
Quick Ratio
 0.891.351.23
Current Ratio
 1.041.431.51
Interest Coverage
 −1.861.413.66
Quick Ratio
PENN
WYNN
MGM

Profitability

Metric
PENN
WYNN
MGM
Return on Assets (Normalized)
 −0.86%8.85%3.03%
Return on Equity (Normalized)
 −3.89%—31.53%
Return on Invested Capital (Normalized)
 1.52%13.75%4.74%
Return on Assets
PENN
WYNN
MGM
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Resorts & Casinos Industry Comparables

Screen in Investor
Ticker
Name
Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
LVS
Las Vegas Sands CorpMjshsxftfLbnyfx$32.8 Bil
GXYEF
Galaxy Entertainment Group Ltd—Gyftjnj$21.4 Bil
GXYYY
Galaxy Entertainment Group Ltd ADR—Pcljhj$21.0 Bil
SCHYY
Sands China Ltd ADR—Zggmkx$19.8 Bil
SCHYF
Sands China Ltd Shs Unitary 144A/Reg S—Mpdlch$19.3 Bil
MGM
MGM Resorts InternationalJmldvtcsFbg$12.6 Bil
WYNN
Wynn Resorts LtdGtgsprsxwMhvbry$10.6 Bil
CZR
Caesars Entertainment IncKdjhgrdddfVymh$7.7 Bil
MLCO
Melco Resorts and Entertainment Ltd ADRWfwvvmvjvFqrnvyc$3.4 Bil

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