With growing consumer demand and the use of cutting-edge technologies, the entertainment sector is well-positioned to cope with potential macroeconomic headwinds. Therefore, it could be wise to own fundamentally strong entertainment stocks Boyd Gaming Corporation (BYD), Golden Entertainment, Inc. (GDEN) and International Game Technology PLC (IGT).

Before delving deeper into their fundamentals, let’s discuss what’s happening in the entertainment industry.

Innovations in virtual reality, augmented reality, streaming platforms, and high-definition displays have transformed the way people consume entertainment. These technological advances have improved the viewing experience, created new opportunities for content creators, and increased the global reach of content, all of which have fuelled industry growth.

The global online gambling market is expected to grow at a 12.6% CAGR until 2028. This growth can be attributed to the increasing adoption of smartphones and internet connectivity worldwide. Additionally, the legalization of online gambling in several countries is also contributing to the market’s expansion.

According to Statista, total revenue in the entertainment market is anticipated to expand at a CAGR of 11.4% to reach $53.13 billion by 2027. Moreover, investors’ interest in gaming stocks is evident from the VanEck Vectors Video Gaming and eSports ETF’s (ESPO) 10.6% returns over the past nine months.

Considering these conducive trends, let’s take a look at the fundamentals the three best the Entertainment - Casinos/Gambling stocks, starting with number 3.

Stock #3: Boyd Gaming Corporation (BYD)

BYD operates as a multi-jurisdictional gaming company. It operates through three segments: Las Vegas Locals; Downtown Las Vegas; and Midwest & South. The company also engages in owning and operating a travel agency.

BYD’s forward EV/EBITDA multiple of 7.24 is 22.1% lower than the industry average of 9.29. Its forward EV/EBIT multiple of 9.39% is 26.7% lower than the industry average of 12.80.

BYD’s trailing-12-month net income margin of 18.89% is 346.4% higher than the industry average of 4.23%. Its trailing-12-month ROTA of 11.09% is 188.1% higher than the industry average of 3.85%.

For the fiscal third quarter, which ended on September 30, 2023, BYD’s total revenues increased 3% year-over-year to $903.16 million. The company’s net income amounted to $199.73 million and $1.93 per share.

BYD’s total current liabilities came in at $583.42 million for the period that ended September 30, 2023, compared to $586.13 million for the period that ended December 31, 2023. Its long-term debt, net of current maturities and debt issuance costs came in at $2.86 billion, compared to $3.01 billion for the same period.

Street expects BYD’s revenue to increase 4.3% year-over-year to $3.71 billion for the year ending December 2023. Its EPS is expected to grow at 2.2% year-over-year to $6.20 for the same period. It surpassed EPS estimates in all four trailing quarters. The stock has gained 4.1% year-to-date to close the last trading session at $56.76.

BYD’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.

BYD also has an A grade for Quality and a B grade for Value and Momentum. It is ranked #5 out of 26 stocks in the Entertainment - Casinos/Gambling industry. Click here for the additional POWR Ratings for Growth, Stability, and Sentiment for BYD.

Stock #2: Golden Entertainment, Inc. (GDEN)

GDEN engages in the ownership and operation of a diversified entertainment platform in the United States. The company operates through five segments: Nevada Casino Resorts; Nevada Locals Casinos; Maryland Casino Resort; Nevada Taverns; and Distributed Gaming.

GDEN’s trailing-12-month EV/EBIT of 3.89x is 69.6% lower than the industry average of 12.80x. Its trailing-12-month non-GAAP P/E of 4.14x is 70.8% lower than the industry average of 14.17x.

GDEN’s trailing-12-month net income margin of 25.06% is 492.3%% higher than the 4.23% industry average. Its trailing-12-month ROCE of 61.53% is 450%% higher than the 11.19% industry average.

In the fiscal third quarter ended September 30, 2023, GDEN’s total revenues were $257.73 million. Its operating income grew 823.5% year-over-year to $323.71 million. Also, its net income and EPS increased significantly from the year-ago quarter to $241.22 million and $7.84, respectively.

Analysts expect GDEN’s revenue to increase 244.2% year-over-year to $8.98 for the year ending December 2024. Over the past month the stock has gained 10% to close the last trading session at $36.74.

It’s no surprise that GDEN has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Value, Momentum and Quality. It is ranked #4 in the same industry.

Beyond what is stated above, we’ve also rated GDEN for Growth, Stability and Sentiment. Get all GDEN ratings here.

Stock #1: International Game Technology PLC (IGT)

Headquartered in London, the United Kingdom, IGT operates and provides an integrated portfolio of gaming technology products and services, including online and instant lottery systems, iLottery, instant ticket printing, electronic gaming machines, iGaming, sports betting, etc. It operates in three segments: Global Lottery; Global Gaming; and Digital & Betting.

IGT’s forward Price/Cash Flow multiple of 7.06 is 18.2% lower than the industry average of 8.64. Its forward EV/EBITDA multiple of 6.66% is 28.2% lower than the industry average of 9.29.

IGT’s trailing-12-month EBIT margin of 22.96% is 211.1% higher than the industry average of 7.38%. Its trailing-12-month EBITDA margin of 34.61% is 213.6% higher than the industry average of 11.04%.

During the third quarter ended September 30, 2023, IGT’s revenue and adjusted EBITDA stood at $1.07 billion and $433 million, up marginally and 7.7% year-over-year, respectively. Its total operating income grew 13.3% year-over-year to $239 million.

The consensus revenue estimate of $4.28 billion for the year ending December 2023 represents a marginal increase year-over-year. Its EPS is expected to come in at $1.95 for the same period. IGT’s shares have gained 27.2% year-to-date to close the last trading session at $28.85.

IGT’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 first in the same industry. It has a B grade for Sentiment, Value, Momentum and Quality. To see additional IGT’s ratings for Stability and Growth, click here.

What To Do Next?

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IGT shares were trading at $27.11 per share on Thursday morning, down $1.74 (-6.03%). Year-to-date, IGT has gained 22.28%, versus a 15.72% rise in the benchmark S&P 500 index during the same period.

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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