Investors interested in Gaming stocks are likely familiar with PENN Entertainment (PENN) and Red Rock Resorts (RRR). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
PENN Entertainment and Red Rock Resorts are sporting Zacks Ranks of #1 (Strong Buy) and #5 (Strong Sell), respectively, right now. This means that PENN's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
PENN currently has a forward P/E ratio of 15.49, while RRR has a forward P/E of 42.04. We also note that PENN has a PEG ratio of 0.51. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. RRR currently has a PEG ratio of 4.88.
Another notable valuation metric for PENN is its P/B ratio of 1.5. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, RRR has a P/B of 27.33.
These are just a few of the metrics contributing to PENN's Value grade of A and RRR's Value grade of D.
PENN stands above RRR thanks to its solid earnings outlook, and based on these valuation figures, we also feel that PENN is the superior value option right now.
Beyond Nvidia: AI's Second Wave Is Here
The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.
See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
PENN Entertainment, Inc. (PENN): Free Stock Analysis Report
Red Rock Resorts, Inc. (RRR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).