Roll the dice on Entain (LSE:ENT) shares? Sure, the past year has been a bust with shares tanking 48.3%, but I wouldn’t necessarily fold on this FTSE 100 giant just yet. Let’s take a closer look.
The numbers
The shares are hovering at £6.60 with a market cap of £4.2bn. Looking at the longer-term chart, this feels a long way from the peak seen in mid-2021, but I feel there are plenty of reasons to be interested in this one.
A discounted cash flow (DCF) analysis suggests that shares are currently trading at a massive 46.6% discount to fair value. And if that’s not enough to get pulses racing, analysts are betting on annual earnings growth of 96.76% for the next few years. Of course both metrics are just estimates for now, but with so much potential, it’s hard to not be a little interested.
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Furthermore, with a price-to-sales (P/S) ratio of 0.9 times, investors are essentially paying less than a pound for each pound of sales the company makes.
For those who like a bit of pocket money, the shares provide a 2.67% dividend yield. It’s not exactly winning the lottery, but it’s not half bad.
Making big moves
But the company isn’t just sitting still. The company recently brought former ASOS CFO Helen Ashton on board as an independent non-executive director. Meanwhile, management are putting their money where their mouth is, with the interim CEO and a non-executive director recently splashing out over £1m on Entain shares. I love to see this level of confidence from those with the best view of the company’s future.
The business already owns more brands than you can shake a stick at – Ladbrokes, Coral, bwin, Sportingbet – you name it. And it’s making a play for the American dream with their BetMGM venture. As more US consumers get the green light to have a flutter online, the firm could be sitting pretty.
A risky bet?
But let’s not get ahead of ourselves. The business is clearly not all aces – there are a few jokers in the pack too. Regulatory headaches, fierce competition, and a debt-to-equity ratio that definitely concerns me (124.4%) are all risks that any potential investor needs to have a long think about.
That said, the firm is already looking at 82.16% gross margins, which is nothing to sneeze at. And with £4.77bn in revenue over the past year, it’s clearly not struggling for business.
Plenty to like
Looking to the future, the current potential undervaluation and growth estimates suggest this could be a company primed for a recovery if management can execute its strategy well.
The FTSE 100 firm clearly has some challenges, but at this price, I think it could well be worth a shot. I’ll be picking up Entain shares at the next opportunity.
