Great Canadian Gaming Corp. Is Great: This U.S. Competitor Is Better

Canadian investors continue to bet on Great Canadian Gaming Corp. (TSX:GC) but they might want to look south of the border for a better alternative.

best, thumbs up

There’s no question that 2017 was a big year for Vancouver-based Great Canadian Gaming Corp. (TSX:GC), both for the company and its stock.

The company made a number of deals that will grow its gaming revenues considerably. On the stock front, it generated a 35% total return for shareholders, the fourth year that it generated over 30% out of the last five years.

Naturally, investors are thrilled with its five-year annualized return of 29%; the most recent announcement in December that it is partnering with Clairvest Group Inc. (TSX:CVG) — one of my favourite stocks on the TSX — to modernize and operate four casinos and racetracks outside Toronto could be just the catalyst to drive its stock into the $40s.

Note that I said, “could be” just the catalyst. There’s no such thing as a sure thing in life. That said, I’ve been a fan of Great Canadian Gaming and its CEO Rod Baker for some time; there simply aren’t many companies as well run that also deliver for shareholders.

Great Canadian Gaming’s great, but …

Oh, it’s great. There’s no question of that.

However, the money laundering scandal at its River Rock Casino in B.C. isn’t shining a favourable light on the company at the moment. The casino’s director of VIP gambler relations has had their registration revoked as a result of violations of the province’s anti-money laundering regulations.

Casinos are a heavily-regulated business, so it’s only natural that flags are raised from time to time. From a positive standpoint, it does provide a wide moat for Great Canadian Gaming because it’s so difficult a business to enter.

Moving away from the regulatory aspect of Great Canadian Gaming’s business, I saw a piece by Bloomberg in The Globe and Mail recently, which echoed my sentiment that the TSX isn’t all it’s cracked up to be.

Canaccord Genuity Group Inc. market strategist Martin Roberge was explaining why the TSX has underperformed so badly.

“On a forward price-to-earnings basis, Canada’s stock benchmark is at the cheapest relative to the S&P 500 Index since the financial crisis,” stated Bloomberg. “But Mr. Roberge suggests looking at the ratio of enterprise value, or market capitalization plus debt, to sales. By that metric, U.S. stocks are actually slightly cheaper than their Canadian counterparts.”

Canadian investors ought to cast a wider net because there are better places to invest in almost every sector.

Great Canadian Gaming might be good, but in my opinion, Churchill Downs, Inc. (NASDAQ:CHDN) is better — and not just because it’s based in the U.S.

The home of the Kentucky Derby

When most people think of Churchill Downs, they think of Mint Juleps and the first leg in horse racing’s Triple Crown.

However, years ago, Churchill Downs diversified into gambling, which has turned into a gold mine for the company — so much so that its shareholders have achieved a five-year annualized total return of 30%, about 100 basis points higher than Great Canadian Gaming.

The company’s trio of revenue streams: racing, casinos, and Twin Spires, its online horse betting platform, are all growing their top- and bottom-line. 

Delivering consistent, if not spectacular growth, CHDN stock hasn’t had a down year since 2009.

Oh, and it doesn’t hurt to own one of the most popular sporting events in North America.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Will Ashworth has no position in any stocks mentioned.

More on Investing

Plane on runway, aircraft
Stocks for Beginners

Up 53% From its 52-Week Low, Is Cargojet Stock Still a Buy?

Cargojet (TSX:CJT) stock is up a whopping 53%, nearing closer to 52-week highs from 52-week lows, so what's next for…

Read more »

Question marks in a pile
Bank Stocks

Should You Buy Canadian Western Bank for its 4.8% Dividend Yield?

Down 35% from all-time highs, Canadian Western Bank offers a tasty dividend yield of 4.8%. Is the TSX bank stock…

Read more »

Gold bars
Metals and Mining Stocks

Why Alamos Gold Jumped 7% on Wednesday

Alamos (TSX:AGI) stock and Argonaut Gold (TSX:AR) surged after the companies announced a friendly acquisition for $325 million.

Read more »

tsx today
Stock Market

TSX Today: Why Record-Breaking Rally Could Extend on Thursday, March 28

The main TSX index closed above the 22,000 level for the first time yesterday and remains on track to post…

Read more »

Nuclear power station cooling tower
Metals and Mining Stocks

If You’d Invested $1,000 in Cameco Stock 5 Years Ago, This Is How Much You’d Have Now

Cameco (TSX:CCO) stock still looks undervalued, despite a 258% rally. Can the uranium miner deliver more capital gains to shareholders?

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

potted green plant grows up in arrow shape
Stocks for Beginners

3 Growth Stocks I’m Buying in April

These three growth stocks are up in the last year, and that is likely to continue on as we keep…

Read more »