When it comes to researching stocks, it is important that you have a system down and an understanding of what you are looking for to deem an investment undervalued or overvalued. Today, we will be looking at Boyd Gaming (NYSE: BYD) to determine if this small cap is worth a potential investment or not. Boyd Gaming is a hotel and casino operator that has operations in Nevada, Illinois, Louisiana, Mississippi and New Jersey (more specifically Atlantic City).
Before getting into the latest developments, I want to look at the stock’s valuation to determine if its fundamental analysis would characterize this stock as a buy or not. Boyd has a market cap of $434.7 million and currently has a “sell” rating from analysts. Furthermore, the company currently does not have a price to earnings ratio, or a forward price to earnings. Valuation ratio wise, we can only value to stock based on price to sales of 0.18 and price to book of 0.36. Additionally, earnings growth is expected to come in at 29% next year and 18.3% next five years. Analysts have a 12-month price target of $6.03 on the stock and year to date performance is down 33%.
As you can see, there is not a whole lot to love about Boyd with a sloppy valuation. However, earnings are expected to see a nice gain next year, which gives us the idea that Boyd could be a great stock to consider. According to the 12-month target, the stock is estimated at seeing a 23% rise next year.
In the short term, there are some risks. As I said earlier, Boyd has operations in Atlantic City, NJ, which was hit very hard by Sandy. Most of Boyd’s hotels managed to avoid catastrophe but expect traffic to be sluggish in that region for a while. Additionally, the gaming company announced a quarterly loss on November 1st after two consecutive quarters of profit.
Due to the factors above, Boyd has been particularly hard. Shares are currently trading at $4.90 and are deeply oversold with an RSI of 18. Traders have been targeting this name as a short candidate since the start of this month. Look for this to continue as the US markets continue to look toppy and the fiscal cliff rapidly approaches.
The bottom line here is that Boyd has been knocked around lately, a little too much. I would like to pick up this name after the New Year and once the fiscal cliff matters are settled. Hopefully by then, we will continue to receive more signs that the US economy really is strengthening and consumers are spending again. Keep an eye out for any developments of an additional storm as well which would send Boyd shares lower. While it has been a tough year for this small cap gaming stock, I suspect that next year will bring much more and ultimately a higher stock price.