Why Penn National Gaming’s earnings are stable
Key performance indicators
Penn National Gaming, Inc.’s (PENN) key performance indicators are volume indicators called slot handle and table game drop, as measured by win or hold percentages.
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The above chart shows PENN’s slot hold percentage and table game win percentage range. PENN’s property slot hold percentage is in the range of 6% and 10% of slot handle. Table game win percentage is in the range of 12% and 25% of table game drop.
Slot handle is the gross amount wagered. The win or hold percentage is the net amount of gaming wins and losses, with liabilities for accruals related to the anticipated payout of progressive jackpots. PENN’s slot hold percentages have consistently been in the 6% to 10% range for the past several years. This stability means PENN has not experienced significant impacts to its earnings.
Table game drop
Customers usually purchase cash chips at the gaming tables. Cash and markers—extensions of credit granted to certain credit worthy customers—are deposited in the gaming table’s drop box. Table game win is the amount of drop that is retained—recorded as casino gaming revenues. Liabilities include funds deposited by customers before gaming play occurs and unredeemed gaming chips.
Since PENN is focused on regional gaming markets, its table win percentages are stable. While table game’s win percentage is higher and more volatile, PENN doesn’t regularly experience high-end play that could lead to volatility in win percentages. As a result, its earnings aren’t that impacted.
Key stocks and ETFs
Investors could invest in an ETF such as the Consumer Discretionary Select Sector SPDR Fund (XLY) for a diversified portfolio in gaming companies.
In the next part of this series, we’ll take a look at PENN’s liquidity ratios.