Bricks and Mortar: Wager on Penn National
Editor's note: "Bricks and Mortar" is a new series of columns written by real estate reporter Nicholas Yulico and meant to help TheStreet.com readers generate real-estate-related stock ideas.
Welcome to the second installment of Bricks and Mortar.
Today's column introduces a new addition to the mock portfolio -- Penn National Gaming (PENN), a company to own -- and provides updates on the stock picks featured in the first Bricks and Mortar installment.
Penn National (Own)While it's getting harder to find a good deal among gaming stocks, Penn National remains a solid play with a rational valuation. The company has no Las Vegas, Macau or Atlantic City exposure, but instead owns 16 riverboat casinos and racetrack/slots operations, mostly in middle America and the South. Penn's primary properties are a "racino" combining slots and horse racing in Charlestown, W.Va., and a riverboat casino in Lawrenceberg, Ind. Expansions are under way to make both properties even more dominant players in their respective markets. Penn's management has a history of running its properties at high profit levels. The company is projected to report 28% EBITDA margins (earnings before interest, taxes, depreciation and amortization), above the 26% average for small-cap and mid-cap companies in 2006. Penn posted a return on equity of 24% in the past 12 months. The firm's earnings per share are expected to grow 15% annually from 2006 to 2008. On a relative valuation level, the shares look attractive. Penn, at $45.56, trades at 22 times estimated 2007 earnings per share, compared with the 35 times average of the mid-cap and small-cap gaming stocks.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV