Thanks partly to a successful World Cup in Russia, revenue rose 12% at constant currency to £483m over the trading period, which included a 15% rise in online revenue in Europe. Unfortunately, the same performance wasn’t replicated across the firm’s retail estate with revenue here falling 1% in the UK, 6% in Ireland and 4% overall. 

Further afield, revenue declined 2% in Australia due to sporting results going against the bookmaker, despite a 25% rise in stakes. Across the pond, however, revenue rose 22% with the company stating that it was “encouraged” by the demand for regulated products despite it still being very early in the evolution of US sports betting.

Commenting on today’s numbers, CEO Peter Jackson stated that management was heartened with the “substantial progress” made by the company against its strategic priorities. According to him, Paddy Power Betfair’s scale and strong financial position mean that it is well placed to respond to forthcoming higher betting taxes and limits on fixed odds betting terminals and to take advantage of growth opportunities within the industry.

Despite earnings before interest, tax, depreciation and amortisation (EBITDA) falling 15% at constant currency to £101m over the three months due to taxes and acquisition costs, the company also saw fit to revise the lower end of its guidance for the full year, predicting that this would now be in the range of £465m-£480m rather than the previous £460m-£480m. Whether this makes the shares worth buying is debateable.

On 16 times earnings, Paddy Power Betfair is one of the more expensive gambling firms on the market. At 3%, the yield is also distinctly average given the cash returns on offer at other from other FTSE 100-listed firms.

While its size and growth potential can’t be dismissed, I’d be more inclined to look for value in the gambling industry right now, especially given the forthcoming regulatory changes. With William Hill’s finances continuing to look somewhat shaky, online gaming solutions provider 888 Holdings (LSE:888) would be my preferred bet. 

Better odds?

True, 888’s share price hasn’t exactly been on scintillating form of late. Priced at 325p back in May, the very same stock had fallen 46% to a low of 175p towards the end of last month on the back of a fairly uninspiring set of interim numbers in September (which revealed revenue and adjusted earnings per share growth of just 1% and 2% respectively).

With management stating that the outlook for FY profit was “in line with market expectations“, however, I’m tempted to say that the drop looks overdone. It’s also worth remembering that 888’s lack of high street presence means that it neatly sidesteps the aforementioned controversy surrounding fixed odds betting terminals. 

If analyst estimates are on the money, the shares now trade on 13 times earnings for the current financial year, arguably making the firm better value compared to the FTSE 100 betting behemoth. Those investing for dividends may also find the forecast 6.2% yield attractive.

Add to this 888’s solid net cash position (equivalent to roughly 20% of the value of the entire company) and high, if somewhat erratic, returns on capital and I suspect this could be one outsider worth backing.

The post Tempted by Paddy Power Betfair? I think this hated dividend stock offers far better value 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 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.

While the FTSE 100 constituent’s numbers looked fairly decent, I can’t say I’m tempted by the stock. Let me explain why.

Quality… but at a price

Although no actual monetary values were given, the company achieved total revenue growth of 10% at constant exchange rates over the reporting period. Organic revenue growth came in at 8%. 

Registering 13% total revenue growth, Experian’s operations in North America did particularly well, although this was boosted by the acquisition of Clarity Services. At 11%, the company’s performance in EMEA/Asia Pacific markets was also more than adequate. 

In contrast to this, performance in Latin America was less strong with total revenue growth of 4% at constant currency as a result of industrial action and “reduced contribution from counter-cyclical revenues.” The same level of revenue growth was recorded in the UK and Ireland following the acquisition of FinTech firm Runpath. 

Over the past year, the credit data company’s share price has gained 21%. When you consider that the FTSE 100 has only climbed by less than 4%, that’s a pretty decent return by most investors’ standards.

The flip-side to this kind of performance, however, is that Experian’s shares now trade on almost 25 times forecast earnings for the current financial year. While it may be argued that this can be justified by the fact that the company should continue to generate solid profits regardless of the economic climate (credit checks will be needed in good times and bad), the rather muted reaction to today’s numbers from the market suggests that much of Experian’s defensive qualities and growth potential are already priced in. 

Experian may be a quality business but I suspect the upside from here will be more limited.

A better bet?

One option I’d pick over Experian would be Paddy Power Betfair (LSE: PPB). Shares in the gambling behemoth have been rather volatile of late after the company disappointed the market with its last update in May.

Revenue over the three months to the end of March came in flat (in constant currency) as the company wrestled with a high number of racing cancellations and reduced customer activity as a result of “a sustained period of bookmaker-friendly sports results.” Q1 earnings fell 6% in constant currency as a result of new betting taxes and start-up losses from the company’s operations in the US.

Despite this (and the incredibly competitive market in which it operates), I’m positive on Paddy’s future, both in the short and long term. The company will surely have benefited from England’s surprisingly decent run in the World Cup and the recent good weather is also likely to have increased interest in the sporting calendar in general. Add to this the potentially massive opportunities for the company in the US following the relaxation of gambling laws and the investment case begins to look compelling in my view.

At 20 times expected earnings (reducing to 18 in 2019), Paddy Power Betfair’s shares look attractively priced compared to those of Experian. Next year’s PEG ratio of 1.1 suggests this is great value given the company’s outlook. And the 2.5% yield, while small relative to that offered by some in the FTSE 100, is still decent for a growth-focused stock.

The post Why I’d consider this FTSE 100 giant over Experian 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 Experian. 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.

Although regarded as a “merger of equals”, Paddy Power shareholders will receive an 11% premium to its share price, based on yesterday’s closing price. This is mostly down to the special dividend of €80 million that Paddy Power shareholders would receive immediately prior to completion.

Following today’s announcement, shares in Paddy Power and Betfair rose by 17.2% and 17.5%, respectively. The double-digit percentage gains recorded by the share prices of both stocks reflect that the market views the merger as a win-win proposition for the shareholders of both companies.

Paddy Power and Betfair are two of the fastest growing gaming companies in the industry, and the combination of the two companies would create an even more powerful competitor in the gambling industry. The combined company would generate revenues of £1.1 billion and will become a market leader in many markets, including the US, UK, Ireland, Australia, and much of Continental Europe.

Betfair has a strong online betting franchise and unparalleled popularity with its betting exchange, whilst Paddy Power has a retail, mass market business and a strong presence in Australia. The two companies have highly complementary assets, and the merger of the two should create significant revenue and cost synergies. Management intends to retain both brands, but there is still significant scope to eliminate duplication, given the overlaps in online operations and geographies.

One area this could have a significant effect is with product development costs. The gambling market is evolving quickly, and companies face costly investments to develop new products and features to attract customers to their online and mobile betting platforms.

With increasing regulatory pressure and higher taxes in many markets, the need to expand is increasingly important. Scale has become a byword in the corporate board rooms, and acquisitions is the quickest way to grow. M&A activity in the gambling industry has picked up recently, with Ladbrokes and Coral agreeing a merger in June, and Bwin.party in talks with potential suitors.

Both companies also released their trading updates today. Despite the pressures affecting the industry, both Betfair and Paddy Power are showing robust growth in revenues and earnings. Betfair saw revenues in the three months leading up to 31 July rise 15% to £135.4, despite a tough comparable period last year, which included the 2014 World Cup.

In the first six months of 2015, Paddy Power’s underlying operating profits grew 68%, whilst net revenue increased 25%. Its latest results also showed the importance of the mobile channel, as mobile net revenue accounted for 67% of online revenue, with 78% of active customers transacting via mobile.

The post A Merger Between Paddy Power Plc And Betfair Group Ltd Is A Win-Win Proposition 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?
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Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

However, three firms that are doing well are Taylor Wimpey (LSE: TW) Direct Line Insurance Group (LSE: DLG) and Paddy Power (LSE: PAP), all of which announced big dividend increases on Tuesday morning.

Taylor Wimpey

It’s no secret that housebuilders are doing well at the moment. The latest to report is Taylor Wimpey, where operating profits rose by 54% to £480m in 2014.

Shareholders will enjoy an increased share of this strong performance, as the firm has increased its ordinary dividend for 2014 to 1.56p, a 126% increase on 2013’s payout of 0.69p.

In addition, Taylor Wimpey paid a special dividend of 1.54p in 2014, taking the total payout for 2014 to 3.1p.

If you’re not a shareholder already, it may not be too late to get on board — the latest City forecasts suggest that Taylor Wimpey’s total dividend payout could rise by almost 200%, to 9p, in 2015, giving a juicy prospective yield of 6.1%!

Paddy Power

Irish bookmaker Paddy Power appears to be on a strong run. Earnings per share rose by 18% in 2014, while pre-tax profits rose by 21% to a record €167m.

The firm’s net cash balance rose from €229m to €285m in 2014, and Paddy Power has now decided to return some of this surplus cash to shareholders.

In addition to a 13% increase in the firm’s regular dividend, which will rise to €1.52 per share, Paddy Power is proposing a cash return of €8 per share for shareholders, funded by a mixture of net cash and new debt.

Although I’d prefer to see Paddy Power using net cash only to fund shareholder returns, investors welcomed this news, sending shares in the bookmaker up by almost 10%.

Direct Line

Like several of its motor insurance peers, Direct Line has got into the habit of paying a special dividend each year.

On Tuesday, the firm announced that it would pay a final dividend of 8.8p and a second special dividend of 4p per share in respect of 2014, taking the total payout for 2014 to 27.2p, 32% more than in 2013.

Direct Line’s generous payouts give the firm’s shares a trailing yield of more than 8%, making them a potentially attractive buy — if you believe the firm can maintain this level of payout in 2015.

The post Do Bumper Dividends Make Taylor Wimpey plc, Direct Line Insurance Group PLC & Paddy Power Plc A Buy? appeared first on The Twelfth Magpie.

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Roland Head has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.