Casino, tavern, and slot machine operator Golden Entertainment (NASDAQ:GDEN) fell short of the market’s revenue expectations in Q4 CY2024, with sales falling 28.8% year on year to $164.2 million. Its GAAP profit of $0.10 per share was 50.3% below analysts’ consensus estimates.
Is now the time to buy Golden Entertainment? Find out in our full research report .
Golden Entertainment (GDEN) Q4 CY2024 Highlights:
Blake Sartini, Chairman and Chief Executive Officer of Golden, commented, “Our fourth quarter performance improved sequentially over the third quarter and we anticipate business conditions will continue to improve in 2025. For 2025, we remain focused on investing in our own assets, returning capital to shareholders and pursuing potential strategic opportunities.”
Company Overview
Founded in 2001, Golden Entertainment (NASDAQ:GDEN) is a gaming company operating casinos, taverns, and distributed gaming platforms.
Casino Operator
Casino operators enjoy limited competition because gambling is a highly regulated industry. These companies can also enjoy healthy margins and profits. Have you ever heard the phrase ‘the house always wins’? Regulation cuts both ways, however, and casinos may face stroke-of-the-pen risk that suddenly limits what they can or can't do and where they can do it. Furthermore, digitization is changing the game, pun intended. Whether it’s online poker or sports betting on your smartphone, innovation is forcing these players to adapt to changing consumer preferences, such as being able to wager anywhere on demand.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Golden Entertainment struggled to consistently generate demand over the last five years as its sales dropped at a 7.3% annual rate. This wasn’t a great result and is a tough starting point for our analysis.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Golden Entertainment’s recent history shows its demand has stayed suppressed as its revenue has declined by 22.9% annually over the last two years. Note that COVID hurt Golden Entertainment’s business in 2020 and part of 2021, and it bounced back in a big way thereafter.
We can better understand the company’s revenue dynamics by analyzing its most important segment, Gaming. Over the last two years, Golden Entertainment’s Gaming revenue (Poker, Blackjack) averaged 30.1% year-on-year declines. This segment has lagged the company’s overall sales.
This quarter, Golden Entertainment missed Wall Street’s estimates and reported a rather uninspiring 28.8% year-on-year revenue decline, generating $164.2 million of revenue.
Looking ahead, sell-side analysts expect revenue to grow 2.6% over the next 12 months. While this projection implies its newer products and services will spur better top-line performance, it is still below the sector average.
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Cash Is King
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Golden Entertainment has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.9%, lousy for a consumer discretionary business. The divergence from its good operating margin stems from its capital-intensive business model, which requires Golden Entertainment to make large cash investments in working capital and capital expenditures.
Key Takeaways from Golden Entertainment’s Q4 Results
We were impressed by how significantly Golden Entertainment blew past analysts’ Gaming revenue expectations this quarter. On the other hand, its EPS missed significantly and its total revenue fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock remained flat at $30.83 immediately after reporting.
Should you buy the stock or not? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free .