2 Reasons to Pick Great Canadian Gaming Corp. (TSX:GC) Over Another Top Gaming Stock Today

Great Canadian Gaming Corp. (TSX:GC) is my pick over Stars Group Inc. (TSX:TSGI)(NASDAQ:TSG) after releasing its first-quarter results in early May.

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Great Canadian Gaming Corp. (TSX:GC) stock has soared 50.1% in 2018 as of close on May 29. Stars Group Inc. (TSX:TSGI)(NASDAQ:TSG) is up 54.8%. Back in January, I’d told Fool readers to bet on both of these gaming stocks in 2018. Now that we have nearly reached the midpoint of the year, it is time to re-evaluate. Both deserve to be in a portfolio with a long-term outlook, but one in particular sticks out as my top pick today.

That stock is Great Canadian Gaming. Below are two reasons why I am sticking with the traditional pick.

The path to legal sports betting in the United States will be a long one

The prospect of legal sports betting is a very exciting one for Stars Group going forward. The company has made a myriad of moves that puts it in a fantastic position to capitalize off the huge United States Supreme Court decision that came down earlier this month. However, the road will be long for this highly lucrative industry to truly ramp up in the United States.

Major sports leagues have moved quickly to urge U.S. Congress to pass comprehensive legislation on legal sports betting. The National Football League (NFL) made the original plea for Congress to pass a law to replace the Professional and Amateur Sports Protection Act. At a public hearing on the issue the National Basketball Association (NBA) released a statement that said in part “…we support the passage of a comprehensive sports betting bill that would serve as a model for a 50-state solution.”

Drafting and pushing forward legislation will be a slow process, which will put a cap on the potential revenue and profits offered to companies like Stars Group in the short and medium term.

Great Canadian Gaming is a revenue beast

In January, Great Canadian Gaming completed the acquisition of the GTA bundle, for which it holds a 49% interest. With this acquisition, Great Canadian Gaming now operates 10 casinos and two racetracks in Ontario. The first quarter saw the first inclusion of the GTA bundle, giving a sign of the potential the acquisition presents for the company going forward.

The company reported revenues of $230.5 million, which represented a 62% increase from Q1 2017. Adjusted EBITDA surged 84% to $88.9 million, and net earnings rose 64% to $29.2 million. As of March 31, 2018, Great Canadian Gaming boasted a cash balance of $391.7 million and an available capacity of $306.8 million on its undrawn senior secured revolving credit facility.

The stock has increased 40.9% month over month. Shares are up over 110% year over year. Although Stars Group also boasts great earnings and attractive potential, Great Canadian Gaming is my choice to pick up today. Its 22-year stake in the GTA bundle should power revenue for the next two decades and provide it ample opportunity to expand and renovate the locations going forward.

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 Ambrose O'Callaghan has no position in any of the stocks mentioned.

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