Over the past six months, Golden Entertainment’s stock price fell to $24.29. Shareholders have lost 13.3% of their capital, which is disappointing considering the S&P 500 has climbed by 16.2%. This might have investors contemplating their next move.

Is there a buying opportunity in Golden Entertainment, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is Golden Entertainment Not Exciting?

Even with the cheaper entry price, we're cautious about Golden Entertainment. Here are three reasons there are better opportunities than GDEN and a stock we'd rather own.

1. Revenue Spiraling Downwards

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Golden Entertainment struggled to consistently generate demand over the last five years as its sales dropped at a 3.3% annual rate. This wasn’t a great result and is a sign of lacking business quality.

2. Projected Revenue Growth Shows Limited Upside

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Golden Entertainment’s revenue to stall. Although this projection suggests its newer products and services will catalyze better top-line performance, it is still below average for the sector.

3. Mediocre Free Cash Flow Margin Limits Reinvestment Potential

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Golden Entertainment has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.3%, lousy for a consumer discretionary business. The divergence from its good operating margin stems from its capital-intensive business model, which requires Golden Entertainment to make large cash investments in working capital and capital expenditures.

Final Judgment

Golden Entertainment’s business quality ultimately falls short of our standards. After the recent drawdown, the stock trades at 31.3× forward P/E (or $24.29 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better stocks to buy right now. We’d suggest looking at a dominant Aerospace business that has perfected its M&A strategy.

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