Century Casinos Stock Soaring, But Still Cheap, Says Analyst

Posted on: April 8, 2021, 12:16h. 

Last updated on: April 8, 2021, 01:15h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Century Casinos (NASDAQ:CNTY) stock is up a scintillating 78 percent year-to-date and 39.47 percent over the past month. But it’s not expensive.

Century stock
The entrance of one of two Century Casinos venues in Colorado, pictured here. Wall Street likes the stock. (Image: Seeking Alpha)

That’s the view of Union Gaming analyst John DeCree, who reiterates a “buy” rating and $15 price target on the regional gaming company. The analyst’s price forecast implies upside of 32 percent from the April 7 close.

In spite of the sharp recovery to start the year, we still see more upside. CNTY is still one of the cheapest and most direct ways to play the reopening,” said DeCree in a note to clients today.

Colorado-based Century owns a pair of eponymous venues in its home state and operates casinos in Missouri and West Virginia. The company also controls gaming venues in Canada and has a two-thirds interest in an entity known as Casinos Poland Ltd.

Century Stock: Margin Expansion Story

By commonly used metrics, Century is one of the smallest publicly traded US gaming operators. Its market capitalization is $306.38 million and it runs just four domestic venues.

Despite that diminutive status, Wall Street is broadly enthusiastic about Century stock. Analysts highlight the name not only as a reopening winner, but one slated to benefit from margin expansion. When the company delivered fourth-quarter results last month, it noted first-quarter trends appear positive, as more gamblers in the 55+ age demographic get coronavirus vaccines and return to Century casinos.

Even with those good vibes and its recent stellar performance, Century stock is inexpensive relative to peers and its own historical norms.

Union Gaming’s DeCree says the shares trade at 6x estimated 2022 earnings before interest, taxes, depreciation and amortization (EBITDA). That compares with a historical range of 6.5x to 7x. The analyst adds Century is cheaper than peers because investors are assigning high multiples to operators with iGaming and online sports betting exposure — segments Century hasn’t heavily penetrated as of yet.

Dealing with Headwinds

Century’s ability to reward investors this year is impressive, as it comes against a still challenging backdrop owing to the COVID-19 pandemic.

The operator’s properties in Canada are scheduled to remain closed until at least next week. That timeline could be extended, as the Ontario provincial government earlier this week issued a new round of shelter-in-place directives.

Last month, Century announced its Poland casinos will be closed until at least April 9. Those venues have been temporarily shuttered and reopened only to be closed again multiple times over the past several months.

The operator is looking to sell its stake in Casinos Poland, which accounted for just one percent of its 2020 EBITDA.