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Should Value Investors Consider Penn National (PENN) Stock?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Penn National Gaming, Inc. (PENN - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Penn National has a trailing twelve months PE ratio of 16.56, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 20.40. If we focus on the stock’s long-term PE trend, the current level puts Penn National’s current PE ratio much lower its midpoint (which is 24.38) over the past five years.
Further, the stock’s PE also compares favorably with the Zacks classified Consumer Discretionary sector’s trailing twelve months PE ratio, which stands at 24.04. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Penn National has a forward PE ratio (price relative to this year’s earnings) of 29.40, so it is fair to expect an increase in the company’s share price in the near future.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Penn National has a P/S ratio of about 0.58. This is significantly lower than the S&P 500 average, which comes in at 3.15 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Penn National currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes PENN a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 5.00, which is somewhat better than the industry average of 9.36. Clearly, PENN is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Penn National might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘C’ and a Momentum score of ‘A’. This gives PENN a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. The current quarter has seen six estimates go higher in the past sixty days and one lower, while the full year estimate has seen a similar trend in the same time period.
This has had a favorable impact on the consensus estimate, as the current quarter consensus estimate has risen by 14.3% in the past two months, while the full year estimate has increased 17.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
The stock holds a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term. However, Penn National is enjoying bullish analyst sentiment, as indicated by the positive estimate revisions, and this works in the company’s favor.
Bottom Line
Penn National is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, despite a decent industry rank (top 26% out of more than 250 industries), a Zacks Rank #3, makes it hard to get too excited about this company overall. However, over the past one year, the Zacks Gaming sector has clearly outperformed the broader market, as you can see below:
So, despite a Zacks Rank #3, we believe that bullish analyst sentiment and favorable industry factors make this value stock a compelling pick.
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Should Value Investors Consider Penn National (PENN) Stock?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Penn National Gaming, Inc. (PENN - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Penn National has a trailing twelve months PE ratio of 16.56, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 20.40. If we focus on the stock’s long-term PE trend, the current level puts Penn National’s current PE ratio much lower its midpoint (which is 24.38) over the past five years.
Further, the stock’s PE also compares favorably with the Zacks classified Consumer Discretionary sector’s trailing twelve months PE ratio, which stands at 24.04. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Penn National has a forward PE ratio (price relative to this year’s earnings) of 29.40, so it is fair to expect an increase in the company’s share price in the near future.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Penn National has a P/S ratio of about 0.58. This is significantly lower than the S&P 500 average, which comes in at 3.15 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Penn National currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes PENN a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 5.00, which is somewhat better than the industry average of 9.36. Clearly, PENN is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Penn National might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘C’ and a Momentum score of ‘A’. This gives PENN a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. The current quarter has seen six estimates go higher in the past sixty days and one lower, while the full year estimate has seen a similar trend in the same time period.
This has had a favorable impact on the consensus estimate, as the current quarter consensus estimate has risen by 14.3% in the past two months, while the full year estimate has increased 17.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Penn National Gaming, Inc. Price and Consensus
Penn National Gaming, Inc. Price and Consensus | Penn National Gaming, Inc. Quote
The stock holds a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term. However, Penn National is enjoying bullish analyst sentiment, as indicated by the positive estimate revisions, and this works in the company’s favor.
Bottom Line
Penn National is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, despite a decent industry rank (top 26% out of more than 250 industries), a Zacks Rank #3, makes it hard to get too excited about this company overall. However, over the past one year, the Zacks Gaming sector has clearly outperformed the broader market, as you can see below:
So, despite a Zacks Rank #3, we believe that bullish analyst sentiment and favorable industry factors make this value stock a compelling pick.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>