As gambling gets increasingly popular, culturally acceptable, and easily accessible, thanks to digital innovations, the industry is poised for solid growth in the long run. Therefore, investors could look to buy fundamentally strong gambling stocks Accel Entertainment, Inc. (ACEL), Inspired Entertainment, Inc. (INSE), and PlayAGS, Inc. (AGS).
Before diving deeper into the fundamentals of these stocks, let’s discuss what’s happening in the gambling industry.
There has been a significant rise in online gambling activities post the pandemic. The legalization of online gambling in various sports and countries has provided a boost to the industry. Due to advancements in technology, gambling companies are now able to offer their services across different geographic locations and to a wide range of customers.
The gambling industry is benefiting from the rise in internet penetration, rising disposable incomes, and the popularity of online gaming. The revenues of the global online gambling market is expected to grow at a compound annual growth rate (CAGR) of 11.7% to reach $153.57 billion by 2030.
With the development of blockchain technology, gambling platforms can now accept payments via the blockchain, making transactions faster, more secure and thereby more appealing. In addition, increased legalization, internet usage, ease of making transactions, advertising and celebrity endorsements is fuelling the industry’s growth.
Given these factors, investors could look to buy fundamentally strong gambling stocks ACEL, INSE, and AGS.
Accel Entertainment, Inc. (ACEL)
ACEL operates as a distributed gaming operator in the United States. It is involved in the installation, maintenance, and operation of gaming terminals, redemption devices that disburse winnings and contain automated teller machine (ATM) functionality, and other amusement devices in authorized non-casino locations.
In terms of the trailing-12-month EBIT margin, ACEL’s 9.66% is 30% higher than the 7.43% industry average. Its 38.65% trailing-12-month Return on Common Equity is 253.9% higher than the 10.92% industry average. Likewise, its 5.82% trailing-12-month CAPEX/Sales is 82.2% higher than the industry average of 3.20%.
ACEL’s total net revenues for the first quarter ended March 31, 2023, increased 48.9% year-over-year to $293.21 million. Its adjusted net income increased 19.6% over the prior-year quarter to $21.06 million. Its operating income increased 30.5% year-over-year to $27.67 million. Moreover, its adjusted EBITDA increased 30.9% year-over-year to $46.12 million.
ACEL’s revenue for the quarter ending June 30, 2023, is expected to increase 22.2% year-over-year to $278.47 million. Its EPS for fiscal 2024 is expected to increase 11.7% year-over-year to $0.88. It has an impressive earnings surprise history, surpassing its consensus EPS estimates in three of the trailing four quarters.
The stock has gained 19.4% year-to-date to close the last trading session at $9.19.
ACEL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #4 out of 29 stocks in the Entertainment - Casinos/Gambling industry. In addition, it has a B grade for Value, Momentum, Sentiment, and Quality. We have also given ACEL grades for Growth and Stability. Get all the ACEL ratings here.
Inspired Entertainment, Inc. (INSE)
INSE, a gaming technology company, engages in the supply of content, platform, and other products and services to regulated lottery, betting, and gaming operators worldwide. It operates in four segments: Gaming, Virtual Sports, Interactive, and Leisure.
On April 24, 2023, INSE announced that it has partnered with FanDuel, a subsidiary of Flutter Entertainment plc, to launch premium iGaming content in Michigan, making it the company’s biggest US state reaching over 90% market coverage.
In terms of the trailing-12-month EBIT margin, INSE’s 17.06% is 129.5% higher than the 7.43% industry average. Its 12.78% trailing-12-month Return on Total Capital is 102.3% higher than the 6.32% industry average. Likewise, its 7.60% trailing-12-month CAPEX/Sales is 137.7% higher than the industry average of 3.20%.
INSE’s total revenue for the first quarter ended March 31, 2023, increased 8.9% year-over-year to $66 million. The company’s adjusted net income increased 414.3% year-over-year to $3.60 million. Its adjusted EBITDA increased 5% year-over-year to $21.10 million. Additionally, its adjusted net EPS came in at $0.13, representing an increase of 550% over the prior-year quarter.
INSE’s EPS and revenue for the quarter ending June 30, 2023, are expected to increase 25.9% and 19.3% year-over-year to $0.33 and $85.05 million, respectively. Over the past year, the stock has gained 30.1% to close the last trading session at $13.85.
INSE’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked first in the same industry. It has an A grade for Sentiment and a B for Growth, Value, Momentum, and Quality. We have also given INSE a grade for Stability. Get all INSE ratings here.
PlayAGS, Inc. (AGS)
AGS designs and supplies gaming products and services for the gaming industry worldwide. It operates through three segments: Electronic Gaming Machines (EGM), Table Products, and Interactive Games (Interactive).
In terms of the trailing-12-month gross profit margin, AGS’ 71.80% is 104.3% higher than the 35.15% industry average. Its 40.07% trailing-12-month EBITDA margin is 267.1% higher than the 10.92% industry average. Likewise, its 15.37% trailing-12-month CAPEX/Sales is 380.9% higher than the industry average of 3.20%.
AGS’ total revenues for the first quarter ended March 31, 2023, increased 14.2% year-over-year to $83.18 million. The company’s income from operations increased 106.9% year-over-year to $11.75 million. Moreover, its total adjusted EBITDA increased 11.4% year-over-year to $36.50 million.
AGS’ EPS for the quarter ending September 30, 2023, is expected to increase 66.7% year-over-year to $0.02. Its revenue for the quarter ending June 30, 2023, is expected to increase 10% year-over-year to $84.22 million. It surpassed the Street EPS estimates in each of the trailing four quarters. The stock has gained 3.7% year-to-date to close the last trading session at $5.29.
AGS’ POWR Ratings reflect its solid prospects. It has an overall rating of B, which equates to a Buy. It is ranked #6 in the Entertainment - Casinos/Gambling industry.
It has a B grade for Growth, Value, and Momentum. Click here to see the other ratings of AGS for Stability, Sentiment, and Quality.
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ACEL shares were trading at $9.12 per share on Friday morning, down $0.07 (-0.76%). Year-to-date, ACEL has gained 18.44%, versus a 8.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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