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Bear Of The Day: Golden Entertainment (GDEN)

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Golden Entertainment (GDEN - Free Report) is a Zacks Rank #5 (Strong Sell) and is slated to report after the close on August 4.  This article was written before the earnings print, but the core idea still rings true.  This is a gaming name and after we just got confirmation that we are in a recession you have to think that investors will not be looking that hard as a discretionary name like this. Let’s look at why this stock is a Zacks Rank #5 (Strong Sell) in this Bear of the Day article.

Description

Golden Entertainment, Inc. is a diverse gaming company which offers casino, distribute gaming and lottery services. The company's gaming divisions consists of Golden Casino Group, PT's Entertainment Group and Golden Route Operations. Golden Entertainment, Inc., formerly known as Lakes Entertainment, Inc., is based in Las Vegas.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number.  This tells me right away where the market’s expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

In the case of GDEN, I see three beats of the  Zacks Consensus Estimate and one miss.   This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.

The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.

Earnings Estimates

The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower.  For GDEN see annual estimates moving lower.

The current fiscal year 2022 consensus number has dropped from $3.73 to $3.54 over the last 60 days.

The next year has dropped from $3.92 to $3.60 over the same time period.

Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).

It should be noted that a majority of stocks in the Zacks universe are seeing negative earnings estimate revisions.  That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).


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