PENN Entertainment Inc (PENN)

[investora2z]

The stock has shown resilience over the past few months. It is up 44% over the last one year, though the intervening period has seen a lot of volatility. It has moved up despite not meeting analyst estimates of earnings. Even in Q3, the company reported numbers which were slightly below estimates. However, the stock continued its upward march. Analysts have been a bit negative on the stock with Credit Suisse downgrading it from a focus list rating to an outperform rating recently. Thomson Reuters/Verus also downgraded it from a hold to a sell rating. On the other hand, analysts at RBC Capital raised their price target for the stock from $57 to $59. It has an outperform rating. The consensus rating for the stock is Hold, and the average price target is just below 56. This indicates that the analysts consider the stock to be fully valued, and some expect it to go down from current levels. There was a ruling in the patent infringement lawsuit filed by MGT Capital Investments (MGT) where Penn is one of the defendants. While the ruling was largely positive for MGT, Penn got a temporary stay pending the outcome of the litigation against retailers of the machines WMS and Aruze. However, the stock has defied analyst opinion, and can be considered a better bet in the sector. This is because it is one of the few companies with a positive bottom-line. It has been reporting net profits over the last couple of years, and it is likely that it may do so in 2013 as well. However, the valuations are a bit high now, as the ttm P/E is above 60. However, the price to sales & price to book are low at 1.51 & 1.95 respectively. The level of debt is high, and that needs to be brought down over time.