The entertainment industry is well-positioned to endure the potential macroeconomic challenges thanks to rising consumer demand and the adoption of advanced technologies. So, quality entertainment stocks Golden Entertainment, Inc. (GDEN), Accel Entertainment, Inc. (ACEL), and Inspired Entertainment, Inc. (INSE) could be wise additions to your portfolio now.
According to Statista, total revenue in the entertainment market is anticipated to expand at a CAGR of 10.5% to reach $48.76 billion by 2027.
The gaming industry has grown rapidly due to the adoption of user-focused technology, such as AR and VR. Smartphone consumers dominate the market, spending hours on their devices playing games. The global gaming market is expected to grow at a 13.1% CAGR until 2030.
Investors’ interest in gaming stocks is evident from the VanEck Vectors Video Gaming and eSports ETF (ESPO) 26.5% returns over the past six months.
Let’s take a detailed look at the featured stocks:
Golden Entertainment, Inc. (GDEN)
GDEN is a diversified entertainment platform operating through five segments: Nevada Casino Resorts; Nevada Locals Casinos; Maryland Casino Resort; Nevada Taverns; and Distributed Gaming.
GDEN’s forward EV/EBITDA of 8.59x is 11.4% lower than the industry average of 9.69x. Its forward Price/Cash Flow of 7.51x is 18.5% lower than the industry average of 9.21x.
GDEN’s trailing-12-month EBITDA margin of 21.84% is 100.8% higher than the industry average of 10.88%. Its trailing-12-month EBIT margin of 13.20% is 80.1% higher than the industry average of 7.33%.
In the first quarter ended March 31, 2023, GDEN’s total revenues increased marginally year-over-year to $278.05 million. Also, its total current assets came in at $455.67 million for the period that ended March 31, 2023, compared to $244.57 million for the period that ended December 31, 2022. Its total liabilities came in at $1.15 billion, compared to $1.16 billion for the same period.
Analysts expect the company’s EPS to be $1.88 for the year ending December 2023. Also, its EPS is expected to grow 8.8% year-over-year to $2.04 for the year ending December 2024. GDEN’s shares have gained 6.1% over the past year to close the last trading session at $41.37.
GDEN’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
GDEN has a B grade for Value, Momentum, and Quality. It is ranked #7 out of 28 stocks in the Entertainment - Casinos/Gambling industry. Click here for the additional POWR Ratings for Growth, Sentiment, and Value for GDEN.
Accel Entertainment, Inc. (ACEL)
ACEL functions as a distributed gaming operator. It is involved in the setup, upkeep, and operation of gaming terminals, redemption devices that disburse winnings, and contain automated teller machine (ATM) functionality. Additionally, ACEL manages other amusement devices in authorized non-casino establishments.
ACEL’s forward EV/EBITDA of 7.12x is 26.5% lower than the industry average of 9.69x. Its forward Price/Cash Flow of 7.58x is 17.7% lower than the industry average of 9.21x.
ACEL’s trailing-12-month ROCE of 38.65% is 292.8% higher than the industry average of 9.84%. Its trailing-12-month ROTA of 7.76% is 112.9% higher than the industry average of 3.64%.
For the first quarter that ended March 31, 2023, ACEL’s net revenues increased 48.9% year-over-year to $293.21 million. Its operating income rose 30.5% from the year-ago value to $27.67 million. The company’s adjusted EBITDA grew 30.9% from the prior-year period to $46.12 million, while adjusted net income stood at $21.06 million, up 19.6% year-over-year.
Street expects ACEL’s revenue to increase 2.3% year-over-year to $1.15 billion for the year ending December 2024. Its EPS is expected to grow 12.5% year-over-year to $0.89 for the same period. Over the past nine months, the stock has gained 30.9% to close the last trading session at $10.99.
It’s no surprise that ACEL has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B for Value, Sentiment, Momentum, and Quality. It is ranked #5 in the same industry.
Beyond what is stated above, we’ve also rated ACEL for Growth and Stability. Get all ACEL ratings here.
Inspired Entertainment, Inc. (INSE)
INSE is a leading B2B provider of gaming content, systems, and solutions for regulated gaming, betting, lottery, social and leisure operators across retail and mobile channels worldwide. The company operates through four segments: Gaming; Virtual Sports; Interactive; and Leisure.
INSE’s forward non-GAAP P/E of 13.12x is 13.4% lower than the industry average of 15.16x. Its forward EV/EBITDA of 5.86x is 39.6% lower than the industry average of 9.69x.
INSE’s trailing-12-month EBIT margin of 16.99% is 131.8% higher than the industry average of 7.33%. Its trailing-12-month EBITDA margin of 24.17% is 122.2% higher than the industry average of 10.88%.
INSE’s total revenue increased 8.9% year-over-year to $66 million for the first quarter ended March 31, 2023. Also, its adjusted EBITDA rose 5% from the year-ago value to $21.1 million. The company’s adjusted net income grew 414.3% from the prior-year period to $3.6 million, while adjusted net income per share stood at $0.13, up 550% year-over-year.
Analysts expect INSE’s revenue to increase 14.7% year-over-year to $327.39 million for the year ending December 2023. Its EPS is expected to grow 35.5% year-over-year to $1.04 for the same period. The stock has gained 50.8% over the past nine months to close the last trading session at $13.86.
INSE’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.
It is ranked #4 in the same industry. It has a B grade for Value, Momentum, and Quality. To see additional INSE ratings for Stability, Growth, and Sentiment, click here.
What To Do Next?
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GDEN shares were unchanged in premarket trading Friday. Year-to-date, GDEN has gained 10.61%, versus a 18.66% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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