Section 1: Company Overview and Fundamentals

1.1 Company Overview:

Penn National Gaming, Inc. (NASDAQ: PENN) is an owner and manager of gaming and racing properties, retail and online sports betting operations, and video gaming terminal (VGT) operations. Its segments include Northeast, South, West, and Midwest. The Company includes 44 properties across 20 states.

1.2 The Key Positives, Negatives, Investment Highlights, and Risks

1.3 Top 10 Shareholders:

The top 10 shareholders together form ~48.62% of the total shareholding. Fidelity Management & Research Company LLC and The Vanguard Group, Inc. are holding the maximum stake in the company at ~11.19% and ~10.71%, respectively.

1.4 Key Metrics:

The company is generating consistent free cash flows for the past six years except for Q12020 because of COVID-19 led disruptions, depicting increased efficiency with good strategic decisions, moreover, offering a free cash flow yield of 11.1%. The other graph shows, except for Q1 2020 revenues are likewise in line with projections and are trending upward, also 5 -Year EBITDA average is above 22% which reflects the strength of the business model to dominate the competition and constantly throw free cash flows to fund future growth.

1.5 Available at a Discount to Its Peers

 From the graph, we can see that PENN is trading at a forward P/E of 14.78x which is the lowest among its peers. Also, if we look at Price to Book value it stands at 1.39x which is again on the lower side as compared to its peers and makes PENN appealing as compared to industry players.

Section 2: Business Updates and Financial Highlights

2.1 Recent Updates:

The below picture gives an overview of the recent updates:

2.2 Insights of Q1FY22:

Section 3: Key Risks and Outlook

Section 4: Stock Recommendation Summary:

4.1 Price Performance and Technical Summary:

4.2 Fundamental Valuation

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance. 

Note 2: The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: The report publishing date is as per the Pacific Time Zone.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavorable movement in the stock prices.