Market Selloff: This Value Stock Just Got Ridiculously Cheap

Great Canadian Gaming (TSX:GC) currently has a PE ratio of 8.81, making this an excellent entry point for this proven long-term winner.

| More on:
Businessmen teamwork brainstorming meeting.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Even before the market selloff, this value stock was inexpensive compared to other stocks. But since the market selloff, this stock is priced too low to ignore.

The stock I’m referring to is Great Canadian Gaming (TSX:GC).

Great Canadian currently has a PE ratio of 8.81 and the stock is trading at $33.34, as of this writing. That’s down from a 52-week high of $53.36, making this an excellent entry point for this proven long-term winner.

Great Canadian has grown to be one of Canada’s largest gaming and entertainment companies, since its inception in 1982. The company maintains 25 properties across Ontario, British Columbia, Nova Scotia, and New Brunswick. These facilities include over 16,000 slot machines, 575 table games, 71 dining amenities, and over 500 hotel rooms.

Revenue increased this year

The company acquired numerous casinos in the Toronto area in 2018, and these acquisitions are beginning to pay off. In its recent fourth-quarter earnings release, Great Canadian reported revenue of $357.4 million.

This represents an increase of 8% for the quarter and an increase of 15%, or $175.8 million to $1.356 billion during the full year of 2019 when compared to the same period last year. The company reported a year-end cash pile of $330 million.

In 2019, the company completed several upgrades to its existing properties. Capital expenditures of over $400 million were used to add a new building at Great Blue Heron, expand gaming at Elements Casino Mohawk and Elements Casino Flamboro, and add to a building at Elements Casino Grand River.

Several of the company’s ongoing projects are nearing completion. The casino building portion at the Pickering Casino Resort, with various dining amenities, is expected to open by the end of first quarter 2020, and the company continues its foundation work at the expansion of Casino Woodbine.

Like many gaming and entertainment companies, Great Canadian provides a significant portion of gross gaming revenue to its crown partners on behalf of their provincial government for the purpose of supporting programs like healthcare, education, and social services.

Through the company’s PROUD program, Great Canadian annually supports over 1,400 charitable and non-profit organizations across Canada.

At writing, the company has a market cap of $1.84 billion. Over the years, the company has consistently offered share buybacks, including $100 million in 2019 to buy back more than 2.5 million shares.

Impact of coronavirus

While the coronavirus is having an immediate impact on several industries, including travel, the disease has not had any effect at the company’s casinos. During the earnings call, when asked about the potential ramifications of the disease on the company’s operations, CEO Rodney Baker commented that there had been no impact on any of the properties to date.

The bottom line

While it’s too early to determine the lasting effect of the coronavirus on the gaming industry as a whole, if you’ve been waiting for an entry point for Great Canadian, this may be the time to pull the trigger.

Consider the company’s growing revenue – the company’s earnings for 2019 were $3 per share despite significant dilution to help finance its acquisitions.

In 2018, earnings were only $1.80 per share, highlighting the trajectory of growth for the company.

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 Cindy Dye has no position in any of the stocks mentioned.

More on Investing

A close up image of Canadian $20 Dollar bills
Dividend Stocks

3 Top Dividend Stocks to Buy Under $20

Given their stable cash flows and high dividend yields, these three under-$20 stocks could boost your passive income.

Read more »

Growing plant shoots on coins
Dividend Stocks

3 Dividend Stocks to Buy During Recession to Lock In a 6% Yield

Make the most of the recession with dividend investing. You can buy stocks for a discount and lock in higher…

Read more »

Bank sign on traditional europe building facade
Bank Stocks

Canadian Bank Stocks Near 52-Week Lows: Buy Them All With This ETF

Here's an easier way to buy the dip.

Read more »

Choice of fashion clothes of different colors on wooden hangers
Stocks for Beginners

Is Aritzia (TSX:ATZ) the Best TSX Stock to Buy in July 2022?

Aritzia’s international market expansion and improving profitability could help its stock recover fast.

Read more »

exchange traded funds

2 Cheap Vanguard and BlackRock ETFs to Buy and Hold Forever

These two funds are great ways to invest in the U.S. and Canadian stock markets.

Read more »

Dividend Stocks

Put TFSA Cash to Work: Earn a Tax-Free Yield of at Least 5%

By investing your TFSA cash in these stocks, you can earn a reliable and high yield of more than 5%.

Read more »

clock time

New TFSA Investors: Time to Buy Stocks Amid the Market Correction?

TD Bank (TSX:TD)(NYSE:TD) stock seems like a great long-term buy for beginner investors willing to put up with the short-term…

Read more »

young woman celebrating a victory while working with mobile phone in the office
Tech Stocks

3 Growth Stocks Trading at a Massive Discount Right Now

Canadian growth stocks such as Shopify have the potential to deliver market-beating gains to investors in the next year.

Read more »