According to the American Gaming Association, sports betting companies generated $2.8 billion in the first quarter of 2023, a staggering 70% increase since 2022 Q1. Analysts expect that the bets on retail and online sportsbooks, including crypto sportsbooks, will cross $100 billion this year, as pro and college football games are just a month away.
In this article, we will explain what the price-to-earnings ratio is and go over the top three sports betting stocks that offer the best value in 2023. Keep reading until the end, as we will also review the companies with the fastest-growing stocks.
Let's get started!
What Is Price-to-earnings Ratio and Why Does It Matter?
When analyzing a company's stock, investors look at the many financial indicators, including the price-to-earnings (P/E) ratio. A P/E ratio determines the value of a business's stock by measuring its current share price relative to its earnings per share (EPS).
Most investors prefer a company with a low P/E ratio. This means that you're paying less for every dollar of earnings that you receive. In other words, a lower P/E ratio is like buying shares at a bargain price.
Analyzing the Sports Betting Stocks That Offer the Best Value in 2023
The following are the top three sports betting stocks that offer the best value in 2023:
Light & Wonder Inc
- Market capitalization: $5.5 billion
- 12-month trailing P/E ratio: 1.6
Previously known as Scientific Games Corporation, Light & Wonder Inc is a US-based company that offers gambling products, such as casino management, slot machines, and table games, and services across six continents.
Headquartered in Nevada, Light & Wonder Inc has a massive platform connecting millions of players worldwide to over 4,000 games across 60 studios.
The company has a majority shareholding ($422 million) in SciPlay, an online casino and mobile game developer that makes the most engaging and exciting mobile social games.
PENN Entertainment Inc
- Market capitalization: $3.6 billion
- 12-month trailing P/E ratio: 5.7
PENN Entertainment Inc is one of the largest integrated entertainment, sports content, and casino gaming operators in the United States. Besides having a significant influence over the online and sports betting market, the company has over 43 casinos and more than 20 racetracks nationwide.
As of 1st August 2023, PENN Entertainment Inc's stock went up 8.6%, almost four times that of the S&P 500. The company has grabbed the attention of investors and Wall Street analysts, with Truist Financial analyst Barry Jonas and Barclays giving a "buy" rating to its stock.
MGM Resorts
- Market capitalization: $15 billion
- 12-month trailing P/E ratio: 8.8
Considered to be a titan of the Vegas Strip, MGM Resorts is a global hospitality and entertainment company with its headquarters in Nevada. Although it operates resorts and some of the largest casinos across the United States, the company is also focused on buying and developing real estate for the gaming industry.
As of August 2023, analysts have high expectations of MGM Resorts, especially after its Las Vegas and Macau casinos saw a surge in traffic during the post-pandemic travel boom. It also owns 13% of the US sports betting market through BetMGM and 30% of the online casino market. This means that the business is rich in cash.
In the first quarter of 2023, MGM Resorts stock prices soared 49.2%, and the company also received a "buy" rating from many financial institutions, including JMP Securities.
Analyzing the Sports Betting Stocks with the Fastest Growth in 2023
If you want to analyze the fastest-growing sports betting stocks, there are certain financial indicators that you need to look at, which include EPS growth. This refers to the growth of earnings per share over time, suggesting whether the company has an increasing or decreasing profitability.
The top three fastest-growing sports betting stocks in 2023 are as follows:
- PENN Entertainment Inc
- Churchill Downs Inc
- VICI Properties Inc
Since we've already gone over PENN Entertainment Inc earlier in this article, let's quickly review the other two sports betting companies.
Churchill Downs Inc
- Market capitalization: $10.7 billion
- EPS growth: 279%
Established in 1875, Churchill Downs Inc started as a horse racing company but slowly diversified and added casinos and online wagering businesses into its portfolio.
Headquartered in Louisville, Kentucky, in the United States, Churchill Downs Inc (CHDN) had an excellent second quarter of 2023, generating $768.5 million in revenue, a 31.9% increase since 2022 Q2.
The company's net revenue for its racing business exceeded analysts' estimates, generating $385 million for the 2023 quarter. Due to its strong financials, Jefferies analyst David Katz gave CHDN its "buy" recommendations.
VICI Properties Inc
- Market capitalization: $31.2 billion
- EPS growth: 49%
Based in New York City, VICI Properties Inc is a real estate investment trust (REIT) specializing in casino properties. The company has the largest portfolio of gaming and hospitality businesses, including 49 gaming facilities, 60,000 hotel rooms, and over 450 restaurants, bars, and nightclubs.
VICI Properties Inc is the landlord of some of the well-known casinos in the United States, including the Mirage, Luxor, Palazzo, MGM Grand, Caesars Palace, and Excalibur, among many others.
In May 2023, VICI Properties Inc announced the expansion of its operations in Alberta, Canada, by acquiring four new properties worth $165 million.
Should You Invest in Gambling Stocks?
The key to a safe and growing investment portfolio is diversification. To minimize the risks, you need to spread your investments across different types of financial assets, such as stocks, bonds, ETFs, and precious metals, among others.
Whether or not investing in gambling stocks is the right choice for you depends on your financial goals. Doing your own technical and fundamental analysis before buying a company's shares is important.
There are many other ratios and indicators besides the P/E ratio and EPS growth that you need to consider. It's best to seek the advice of a professional financial consultant to discuss your investment goals and determine the right strategy for you.
Final Thoughts
During the lockdown, online gaming businesses experienced massive growth as more people started participating in wagering activities while at home.
When the global economy started opening up after the Covid-19 pandemic, the casinos and hotels saw an increase in traffic, which skyrocketed their revenues.
The companies we've discussed on our list have an excellent P/E ratio and have shown significant EPS growth. This is because they have a well-diversified business portfolio.
However, before investing in these businesses, it's crucial that you do your research and speak to a financial advisor.
