Unlocking the Value of Boyd Gaming Stock: Is It a Buy or Sell?

PUBLISHED Apr 17, 2025, 9:37:06 PM        SHARE

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In the ever-evolving world of investing, evaluating stocks to determine their worth and potential can be as thrilling as a game of chance at a casino. Boyd Gaming Corporation (NYSE: BYD), a prominent player in the gaming and hospitality industry, is no exception. With its diversified portfolio spanning casinos, hotels, and online gaming, Boyd Gaming stands as a mid-cap company with a market cap of $5.7 billion. But is this stock a smart investment? Let’s analyze its financials and ratios to uncover whether Boyd Gaming is a buy or sell.

Understanding Boyd Gaming's Business and Market Presence

Boyd Gaming, headquartered in Las Vegas and established in 1975, has built a robust presence in the U.S. and Canada. Its operations include:

  • Casinos and Hotels: Traditional gaming and hospitality venues.
  • Boyd Interactive: The company’s rapidly growing online casino platform.
  • Travel Agency Services: Additional diversification to enhance revenue streams.

Trading at $68 per share with 84 million shares outstanding, Boyd Gaming has carved its niche in a competitive industry.

Financial Performance: Steady Growth but Margins Under Pressure

Boyd Gaming's financial performance reveals a mix of strengths and challenges:

  1. Revenue Growth: Revenue has steadily increased, rising from $3.4 billion to $3.9 billion over recent years.
  2. Free Cash Flow: While free cash flow has declined from $800 million to $557 million, the company maintains strong margins, though they’ve dipped from 24% in 2021 to 14% in 2024.
  3. Net Income: Profits have been stable, peaking at $639 million in 2022 and slightly decreasing to $578 million in 2024. Net income margins hover between 14% and 18%.
  4. Dividends and Share Buybacks: Boyd offers a modest 1% dividend yield and actively repurchases shares, enhancing shareholder value.

Valuation Insights: A Hidden Gem?

Boyd Gaming’s stock appears undervalued based on key metrics:

  • Intrinsic Value: Using a discounted cash flow model, Boyd Gaming is valued at $86 per share, representing a 21% upside from its current price of $68.
  • Price Multiples: Boyd boasts some of the most attractive price-to-earnings and price-to-free-cash-flow ratios in its industry, making it a competitive option for value investors.

A Deeper Dive into Revenue Segments

Boyd Gaming’s revenue streams reveal important insights:

  • Gaming Revenue: A dominant contributor, especially in the Midwest and South, generating $1.7 billion annually.
  • Online Revenue: Rapidly growing, jumping over 130% since 2022 to reach $600 million.
  • Geographic Breakdown: Las Vegas locals contribute $900 million, while downtown Las Vegas adds $230 million. However, regional casinos in the Midwest and South remain the largest segment.

Industry Position and Competitive Edge

Comparing Boyd Gaming to its peers reveals several advantages:

  • Debt Management: With a debt-to-equity ratio of 2.4, Boyd performs better than the industry average of 5.0.
  • CapEx Investments: Boyd consistently reinvests in its properties, with $400 million allocated to capital expenditures in 2024, highlighting a commitment to maintaining competitive offerings.
  • Earnings Per Share (EPS): EPS growth, supported by share buybacks, has been impressive, climbing from $5.87 to $6.19 over the past three years.

Conclusion: Rolling the Dice on Boyd Gaming

Boyd Gaming’s solid fundamentals, undervalued stock price, and strategic growth initiatives make it an attractive option for both short-term and long-term investors. While free cash flow has seen some pressure, the company’s efforts to enhance operational efficiency and grow its online presence signal a promising future. For those looking to invest in the gaming sector, Boyd Gaming offers a compelling case that is worth considering.

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