Persimmon (H1 trading update)

Persimmon (LSE: PSN) is one of Britain’s biggest and most renowned housebuilders. It builds properties ranging from flats to large family homes located across the UK. The FTSE 100 firm is expected to provide a trading update for its most recent half-year performance ending June 2022 on Thursday 7 July.

Analysts in the UK don’t normally publish earnings previews for six-month periods, so it’s best to compare the firm’s upcoming 2022 first-half numbers to the ones from a year before. The H1 2022 figures can also be useful to determine whether it’ll outperform its FY21 numbers, or even beat analysts’ FY22 forecasts.

In this case, Persimmon is predicted to show slight growth in its numbers as housing supply continues to attempt to match high demand. If the housebuilder posts a better-than-forecasted number on Thursday with positive guidance, it could be on course to beat its financial year estimates.

Entain (H1 trading update)

Entain (LSE: ENT) is an international sports betting and gambling company. It owns brands such as Bwin, Coral, Ladbrokes, PartyPoker, and Sportingbet. Entain will provide a trading update for its most recent half-year performance ending June 2022 on Thursday 7 July.

Based on the earnings preview, Entain expects to have a much stronger second half to its financial year than its first. Nonetheless, a headline beat on its previous year’s H1 results could spell a positive outlook for the firm.

Vistry (H1 trading update)

Vistry (LSE: VTY) is another housebuilder that’s providing investors with a trading update. The Kings Hill-based firm will be updating shareholders on for its most recent half-year performance ending June 2022 on Thursday 7 July.

Just like its peer, Vistry is also expecting modest growth in its numbers. This is expected to come from rising house prices. The key metric to look out for will be its diluted earnings per share metric. A better than expected number could make analysts’ predictions of achieving a much higher EPS later this year possible.

The post Earnings preview: Persimmon, Entain, Vistry appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Game on

Total revenue rose 7% to just under $230m in the three months to the end of September. As usual, the vast majority of this ($220.3m) came from the company’s business-to-consumer (B2C) division. Here, an 11% rise in gaming revenue was logged. This is impressive when it’s considered just how good the previous year was for the company, thanks to people being forced to stay at home (and surf online).

On the downside, a 15% fall in betting revenue was also reported from this part of the company, due to the “condensed calendar of sporting events” happening in Q3 last year. Even so, B2C betting was still 21% higher compared to Q3 two years ago. For me, this is a far better way of gauging just how quickly the company’s growing. 

All of the above brings 888’s revenue for the year-to-date to $758.3m. That’s a rise of 28% compared to January-September 2020.

But can this last?

The fact that 888 continues to rake in cash following the lifting of restrictions bodes well. For its part, management believes that trading over the remainder of 2021 will be in line with expectations. 

Then again, nothing’s guaranteed. Aside from the (admittedly small) possibility that we’ll want to spend less time at our screens, one issue with any gambling-related stock is the potential for increased regulation. 888’s no stranger to this after the Dutch government’s recent decision to launch a licencing system for online betting in the country.

As a result, 888 removed itself from this market at the beginning of October. It now intends to apply for a licence “in the coming months” and be up and running by H2 next year. Even so, the company’s expecting a $10m hit to earnings. This may help explain why the share price is down today.

Will 888 be snapped up?

In a move that could turbocharge profits in the year ahead, 888 snapped up William Hill International in Q3. It also launched SI Sportsbook in Colorado and 888sport in Germany. Having been the hunter for a while, however, I think it’s quite possible that 888 could become prey. 

At yesterday’s close, shares were trading at 20 times forecast 2021 earnings. That looks very reasonable for a company that boasts a strong brand, is growing well, has net cash and consistently posts excellent returns on the capital it invests. Even if a suitor doesn’t come knocking immediately (and I’m against buying solely on this possibility), I wouldn’t rule out further consolidation in the industry in time.

The one that got away

888 is one of those stocks I highlighted as being a potential bargain in the early days of the coronavirus crisis. Unfortunately, it’s not a stock that I went on to buy myself. Had I done so, I’d be sitting on a gain of around 260% by now. Still, one can’t be invested in everything.

Offering a tempting combination of growth and income, I’d be comfortable buying this stock today — takeover candidate or otherwise. 

The post As Playtech is gobbled up, is this FTSE 250 stock next? appeared first on The Twelfth Magpie.

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• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Rather than dismiss me as some irksome Scrooge out to steal any sense of joy from the festive period, l implore you to keep reading. Your future (far richer) self may thank you for doing so.

National Lottery draw: The awful odds

To begin with, let’s look at some facts. Your chances of having the winning Lotto ticket by picking the correct six numbers are 1 in a little over 45m. To put things in perspective, you have a better chance of being struck and killed by lightning in the UK (1 in 19m). 

Even just matching three numbers isn’t easy. Only 1 in 97 tickets manages this feat. And the prize for all that good fortune? £30.  

What’s the harm?

Now, don’t get me wrong. I’m not for a minute suggesting people don’t know what they’re doing. While most of us won’t know the exact odds of winning mentioned above, we’re sensible enough to appreciate the chances are slim to exceptionally slim.

There is, of course, nothing inherently wrong with a one-time flutter at Christmas either. Just dreaming about what one could do with £15m is nice enough, particularly after the horrific year that 2020 has been. 

No, the problem comes from repeatedly buying tickets. And given that many people will be feeling the pinch in 2021, due to Brexit and Covid-19, it’s quite possible some will get into the habit of doing so to increase their chances of striking it rich.  

This habit could get very expensive. Right now, entering the main National Lottery draw costs £2 per line. Let’s say a person regularly plays five ‘lines’ twice a week, every week. Over the course of a year, that comes to a staggering £1,040.

I think there’s a far better route to riches.

UK shares are a better bet

Given the choice, I’d always invest that £1,040 in the best UK shares I can find over participating in the National Lottery draw. There are a couple of big reasons for this.

First, shares are more likely to make people rich than the Lotto ever will, albeit at a slower rate. History shows that stock market returns trump every other asset over the long term.

Remember that £1,040? If I were to invest this amount in the stock market in one go and generate a quite reasonable 7% annual return for 30 years, I’d have almost £8,000 at the end. If I managed to make a 10% return, I’d have a little over £18,000. Sure, there will be ups and downs along the way, but the end result is surely worth holding for.

Don’t forget, this example is based solely on the money that could have been spent gambling in a single year. Think how much better the outcome could be if I put even more money to work. 

A second reason is that, right now, many London-listed stocks are still far too cheap. As seasoned investors will attest, the very best time to buy shares is when they are hated. Pick well, and the Christmas flutter you do have on a National Lottery draw will be irrelevant.

The post Forget the National Lottery draw. I think UK shares are a better way to get rich! appeared first on The Twelfth Magpie.

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• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Did you miss out on all these gains? Don’t worry, I think the share could still be worth buying.

First, let’s take a closer look at today’s statement, covering business from the beginning of 2020 to 23 June. 

888 beats expectations

As mentioned by the company back in March, 888 was already trading well. Thanks to lockdown and everyone doing practically everything online in recent months, however, average daily revenue has gone through the roof. It’s now 34% higher year-to-date compared to last year (during which customer numbers began to rise). 

One particularly positive bit of news is the “encouraging performance” seen at the company’s poker division. This was, after all, the part of 888’s offering that was proving a drag not long ago.

Elsewhere, the company said that it had seen a “better than expected customer reaction” to the resumption of sports in recent weeks. Indeed, 888’s revenue run rate in this part of the business is currently ahead of that seen in June 2019.  

Given all this, it should come as no surprise that 888 announced today that adjusted earnings for the current year will be “significantly ahead” of what management previously expected. 

And while it shouldn’t really matter considering the mid-cap’s online-only business model, news that some of its staff are now being allowed to return to their offices is yet another positive. 

This all sounds great

Absolutely. The question, however, is whether it can last. 

As you might expect from any company doing well at the moment, 888 cautioned investors on the potential for recent momentum to slow in the rest of 2020. Reference to “some moderation to revenue growth in recent weeks” in today’s statement suggests this is already happening to some extent. 

In addition to this, management reflected that “a period of prolonged global macro-economic uncertainty” later in 2020 could see consumers rein in their spending. While I think holders should remain optimistic, I do think this warrants consideration.

Still a FTSE 250 ‘buy’

888s shares were trading on 16 times earnings before markets opened this morning. Clearly, anyone considering buying in now will need to dig a little deeper into their pockets. 

Nevertheless, I think the shares still represent good value for what investors are getting.

The company is nicely diversified, both geographically and within its product range. It also looks financially sound, at least compared to a lot of listed companies at the moment. Moreover, the business isn’t hampered by any of the fixed costs associated with running physical stores like other gambling firms.

And then there are the dividends. Based on a 4.5p per share payout in the current year, 888 yields 2.6%. Sure, you can get more elsewhere in the market but do these alternatives have the same growth prospects? Let’s not forget about the gradual legalisation of sports betting in the US. Any sign that 888 is really exploiting this trend could see even more investors take an interest in the stock.

Congratulations to those already holding. I wouldn’t bank profits just yet. 

The post This top FTSE 250 stock is up 15% today! I think there could be more to come appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

In only a couple of months, however, these stocks have bounced back strongly. Indeed, those who had the courage to buy William Hill back in the middle of March will have seen their money grow an incredible 200% since.

With lockdowns now beginning to ease around the world, is there still time to get on board? Let’s start by taking a quick look at today’s trading update.

Game off

All things considered, this morning’s statement could have been a lot worse.

While a flagging retail arm meant that total revenue declined 5% in the 10 weeks before the coronavirus hit, the company was still making great strides online over this period. Overseas growth, particularly in Spain, Italy and the potentially-very-lucrative US market was strong in this part of the business. 

From 11 March to 28 April, however, net revenue tumbled 57%. That fall was partly due to the closure of the company’s entire retail estate as a result of the pandemic.

It wasn’t all bad. Encouragingly, the FTSE 250 member said today that online activity had not declined as much as expected. Punters were continuing to bet on sports like table tennis and football in emerging markets. Others were switching to games offered by the company. Interestingly, the introduction of a ban on customers using credit cards had not led to a material drop in activity.

William Hill has also done its bit to mitigate the impact of the coronavirus on its finances. Costs have been cut and dividend payments have been suspended. Having come to an agreement with its lenders, the FTSE 250 stock said that it finished the trading period “in a strong financial position with significant headroom“. 

FTSE 250 recovery play?

Shares in William Hill were racing ahead of the pack again in early trading, This suggests that investors believe the company still offers value. Are they right?

Well, as the company itself noted, there are signs that the sporting calendar could be about to get back on track. Football in Germany, for example, is expected to resume this month, albeit behind closed doors. Horse-racing is likely to return to the UK in June, having already restarted in France.

For its part, Hill said that it was currently planning to ‘power up’ its operations through a “staged opening of the UK retail estate in the second half of 2020″. Notwithstanding this, it did say that it would be withdrawing all future guidance on earnings.

With the shares still around 45% lower than where they were trading at the start of 2020, I can’t help but feel there’s still some money to be made. This is especially true given that the company is nicely positioned to benefit from the huge growth of gambling in the US as rules are gradually relaxed. 

I certainly wouldn’t go ‘all-in’ on William Hill though. After all, no one knows just how successful the lifting of restrictions will be. News of a second wave will almost certainly obliterate the gains made since March as events get postponed again. It’s a bet worth taking, in my view, but I’d be inclined to build a position gradually.

The post This FTSE 250 stock has jumped 200%+ since the market crash. Would I buy now? appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Today, I’m focusing on two firms that, while going through challenging times, will likely fall into the former category. 

Worth a bet

With gambling firms continuing to feel the pressure of increased taxation and regulation across the industry (the recent introduction of a £2 limit on fixed-odds betting terminals in shops is an example), it’s not all that surprising their stock continues to be shunned by investors.

One that I continue to think has been undeservedly punished, however, is 888 Holdings (LSE: 888), particularly as it doesn’t have a presence on the high street whatsoever. Instead, 888 is focused purely on providing online casino, bingo, sports and poker games. In contrast to other operators, it also benefits from owning its own technology platform.

Recent trading at the small-cap has been far better than at some of the UK’s battered bookmakers. June’s trading update highlighted a 6% increase in group revenue on a like-for-like basis as a result of increased marketing investment. This has, in turn, helped the company record a 20% rise in new customers. The only real fly in the ointment was the poker market which, while seeing a slight improvement in revenue, “remained challenging.“

Another attraction to 888 is the fact it already has an established presence in the US through its tri-state poker network and administration of the Delaware state lottery — something which could prove particularly lucrative if regulation over betting continues to be initiated in multiple states across the pond.

Taking all this into account, a forward price-to-earnings (P/E) ratio of 12 for this financial year looks cheap to me. The 6.4% yield should also be adequate compensation while investors await a full recovery. 

As a holder of the stock, I’ll be hoping for more positive news when interim results are revealed on 10 September.

Share price stabilising

Another business reporting next month is consumer products mid-cap PZ Cussons (LSE: PZC) — owner of brands such as Imperial Leather and Original Source. The company is due to issue a trading update to coincide with its Annual General Meeting on 25 September. 

After a pretty awful few years, the share price has shown signs of stabilising in 2019 (although it’s still down roughly 40% from where it was three years ago).

That’s not to say, however, that PZ is out of the woods just yet. As my Foolish colleague Kevin Godbold summarised last month, the company’s last set of full-year results were hardly great with issues in its African markets continuing to offset performance elsewhere.

Nevertheless, the very fact the company is so geographically diversified is, for me, one of its biggest attractions. Combine this with the fact consumers often stick with brands they can trust in sprite of cheaper alternatives and you have a pretty defensive investment.

Shares in PZ currently trade at 16 times forecast earnings and yield a smidgen over 4% with the latter covered 1.5 times by profits. While I doubt the share price will rocket next month, news that trading hasn’t got any worse could bring more investors back to the stock. 

The post 2 battered dividend stocks I’m backing to recover appeared first on The Twelfth Magpie.

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• After upgraded guidance, is PZ Cussons primed for a FTSE 250 comeback?

Paul Summers owns shares in 888 Holdings. The Motley Fool UK owns shares of PZ Cussons. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

However, when you get to understand how stock market investing works, and realise long-term investing is a proven way of building wealth, it becomes clear it’s nothing at all like gambling. Here’s a look at how the two differ.

Gambling

When you bet on a horse race or football match, or play roulette at a casino, you’re gambling. You’re wagering money on an event with an uncertain outcome, in the hope of winning more money.

The thing about gambling is it’s very hard to make consistent profits. Sure, some talented individuals do make a living betting on sports or playing poker but, in general, most people just end up losing. One of the reasons for this is that gambling is a zero-sum game – winners merely take money from losers. Add in the bookmaker’s or casino’s edge, and the odds are against you. That makes it quite challenging to win consistently. 

Investing

Investing is very different. The main thing to understand about stock market investing is that, over the long term, stock markets tend to rise, meaning if you’re willing to invest for a number of years, the odds of profiting are in your favour.

For example, since the FTSE 100 index was launched in January 1984, it’s risen from a value of 1,000 points to around 7,500 points today. Similarly, over the last 20 years, the S&P 500 index has risen from around 1,300 points to near 3,000 points.

What this means is that if you’re willing to invest for the long term, there’s a good chance you’ll make a decent return on your money. Studies back this up. According to this year’s Barclays Equity Gilt Study, since 1899 British stocks have returned around 5% per year on top of inflation. In other words, long-term investing is a proven way of generating wealth. 

Of course, if you’re investing on a short-term basis, it’s a little bit like gambling, simply because market movements can be unpredictable over shorter periods. No one knows what the market will do tomorrow, or over the next week. However, if you follow experts’ advice and invest for a minimum of five years, the chances of losing money decrease significantly.

In summary, when you compare gambling to investing, you’ll see they’re very different things. With gambling, it’s very hard to make money consistently. But with investing, there’s a good chance of earning a decent return on your money as long as you’re in it for the long term.

The post Is stock market investing gambling? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Having been under sustained pressure over 2018 on the back of regulatory changes, is there anything in today’s announcement to suggest that the shares are a decent contrarian buy? Yes and no.

A “challenging year”

Despite a “challenging year” for all bookmakers, CEO Peter Jackson said that the £4.9bn cap had “regained its mojo“.

Revenue rose 9% at constant currency to £1.87bn in 2018 with the company seeing 5% growth online and an increase in market share in the UK.

That said, reported pre-tax profit came in at £219m — down 11% on that achieved in 2017. Earnings per share were also 6% lower due to investment across the pond. 

On the topic of growth opportunities in the US, Mr Jackson remarked that the decision to overturn the federal ban on sports betting last May had “the potential to be the most significant development to occur within the sector since the advent of online betting” and justified the company’s speedy swoop for the FanDuel brand.  

As far as 2019 was concerned, the Dublin-based business stated that trading had started in line with expectations and that it was seeing “good momentum” across its divisions, despite the inevitability of further regulatory pressure.

In perhaps the most bizarre part of today’s report, PPB also informed the market of its desire to change its name to Flutter Entertainment to reflect the “increased diversity” of its brands and operations. What an awful name!

Contrarian buy?

After losing over 30% of its value since shares peaked last May, one might suspect the shares would now be changing hands at a very reasonable price.

Not exactly. Trading on a little over 18 times expected earnings, the stock still looks pretty expensive compared to rivals and the market as a whole.

Having maintained its 200p full-year dividend, a trailing yield of 3.3% certainly isn’t awful, but there are companies in the FTSE 100 with far more tempting payouts. 

With further investment likely and net debt rising fast, I can’t see this situation changing anytime soon. 

Better price?

Of course, Paddy Power isn’t the only company wanting a piece of the action in the US. 

Shares in fellow FTSE 100 constituent GVC (LSE: GVC) rose strongly yesterday after the company released some very decent full-year numbers. Pro forma net gaming revenue came in 9% ahead of last year (at £3.57bn) with pro forma underlying EBITDA also rising 13% (to £755.3m).

Hailing a “transformational year” following its acquisition of Ladbrokes Coral, CEO Kenneth Alexander stated that effective marketing and a bumper World Cup had meant GVC had performed “ahead of expectations and materially ahead of the market”. Now the world’s biggest sports-betting and gaming operator, he believes the company is well-placed to deal with the forthcoming regulatory hurdle and tax increases in 2019. 

Recent momentum certainly shows no sign of slowing with the firm reporting an 11% rise in net gaming revenue since the start of the year to 24 February compared to over the same period in 2018. 

Taking into account its lower valuation (12 times earnings), higher dividend yield (4.6%) and US joint-venture with MGM Resorts, I’d probably bet on GVC over Paddy Power Betfair.

That said, neither compares to my personal favourite in the sector.

The post Is this out-of-favour FTSE 100 growth stock now a great contrarian buy? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended GVC Holdings and Paddy Power Betfair. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Are today’s less-than-comforting full-year numbers — not to mention a cut to the dividend — an indication that investors should continue to avoid the troubled £1.6bn cap?

I think so. 

High street woes

To be clear, the huge drop in profits was expected. 

As a result of the government’s decision to restrict the maximum stake on all fixed-odds betting terminals to £2 from April, the company has needed to write down the value of its high street estate by a whopping £882.8m.

Going forward, management expects this new rule will reduce profitability from this part of its business by £70m-£100m and could lead to the closure of “up to 900 shops“

The full impact will clearly depend on how punters respond. Hill might believe that its status as the largest operator puts it “in a strong position to capture market share” but I still need to be convinced. 

Attempting to put a positive spin on things, CEO Philip Bowcock stated that recent regulatory decisions had at least given the firm some “much needed clarity“, allowing it to devise a new five-year strategy and set a target of doubling profits by 2023.  I think the latter may be too optimistic.

It wasn’t all bad…

Don’t get me wrong – there were some positives. Revenue climbed 2% to £1.62bn with the company also reducing net debt by 40% to £308.1m. 

Like others in the space, Hill is also seeing growth online. 

Here, operating profit climbed 11% before a £17m hit from new measures surrounding customer due diligence. The acquisition of Mr Green — completed back in January — should help maintain this momentum going forward.

That said, the key driver of growth for the company going forward will surely be the US sports betting market. Having been “first out of the blocks“, Hill now has a 34% market share (by revenue) across the seven regulated states.

Worth a punt?

I don’t think there’s a stock that I’ve changed my opinion on more times over the years than William Hill. Right now, I’m pretty negative.

Based on an expected 42% drop in earnings over 2019, the shares now trade on a forecast P/E of 16. That’s far too rich for me, despite the aforementioned growth opportunities over the pond. While no doubt attractive, it can’t be forgotten that the business is already operating in a very crowded market and that competition for this new prize will surely only become more intense as the months pass. 

The 9% reduction in the dividend from 13.2p per share in 2017 to 12p per share is also another bitter pill to swallow. Granted, it’s not as big a cut as that seen at this FTSE 100 retail stalwart but, with the shares on something of a losing streak (down 40% in the last 12 months alone), Hill’s income credentials were one of the few things keeping me interested. 

Personally, I think there are far better stocks in the gaming/gambling sector as things stand. Indeed, so positive am I on one in particular that I’ve actually gone ahead and taken a position. You can read all about it here.

The post This FTSE 250 stock is on an awful losing streak and today’s news won’t help appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Based on today’s less than enthusiastic response to its latest trading update (-3%), it seems many market participants still need to be convinced that this fall is overdone. 

Losing streak

While short on detail, today’s release did state that adjusted operating profit for the 53 weeks to the start of January is expected to come in around £234m. This is 15% below that achieved in the previous year (although it was at least in the middle of the range previously predicted by the company of between £225m and £245m).

At least some of the blame was attributed to a reduction in year-on-year profits from Hill’s retail estate in the UK, itself suffering as a result of “wider high street conditions.”

With new limits on fixed-odds betting terminals being introduced later this year, and recent consolidation in an already extremely competitive industry, it’s hard to see things improving here any time soon. 

Instead (and like many of its peers), the £1.5bn-cap regards the potential relaxation of legislation surrounding sports betting in the US as its primary growth opportunity. On this front, the firm’s partnership with casino chain Eldorado Resorts is a positive step.

However, time will tell as to whether this market will prove as lucrative as management believes. The FTSE 250 constituent’s US operation “broadly broke even” last year after taking into account “significant expansion costs.“

Hill’s shares traded on 12 times earnings before markets opened this morning and yielded nearly 6%. In addition to this, and the aforementioned opportunities in the US, the planned imminent purchase of Swedish gaming company Mr Green and“good underlying performance” from its online offering last year, might be enough to convince some contrarians to take a position.

That said, I’d be inclined to wait to see what exactly CEO Philip Bowcock has planned for its UK estate (due to be “remodelled” in 2019) before deciding whether the company is finally worthy of investment. 

Better odds?

Of course, William Hill isn’t the only company that will benefit from a change on betting rules across the pond. £4bn-cap GVC Holdings (LSE: GVC) — owner of rival Ladbrokes Coral — could do very well from the development, given its US joint-venture with MGM Resorts.

In sharp contrast to the reaction to Hill’s news, last week’s trading update on the whole of 2018 was cheered by investors and it’s not hard to see why. Proforma underlying earnings are now likely to come in between £750m and $755m — ahead of what the market was expecting.

Despite like-for-like revenue falling 3% in the UK, GVC saw online revenue jump 19% over the year. Business was also good in Europe with revenue from retail growing 16%.  

Based on these numbers, CEO Kenneth Alexander reflected that GVC was “materially outperforming the market” and taking market share from rivals in all territories it operates in. 

Still 40% below the share price highs achieved last July, GVC trades on almost the exact same valuation as William Hill’s. A forecast yield of almost 4.8% is lower than that offered by the mid-cap, but this payout is better covered by anticipated profits. 

The post Why I still don’t think it’s time to bet on this battered FTSE 250 stock appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended GVC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.