Missouri Betting And Canadian Property Upgrades Will Shape Future Success

Key Takeaways

• Expansion into online betting and property upgrades is expected to drive revenue growth, improved margins, and greater customer engagement across key regions.
  
• Strategic asset review and focus on operational efficiencies may unlock hidden value and enhance future profitability and shareholder returns.
  
• High debt, geographic concentration, competitive pressures, shifting demographics, and rising costs threaten growth, margins, and earnings stability for Century Casinos.

Catalysts

Operates as a casino entertainment company in the United States, Canada, and Poland.

• New partnerships to launch online and mobile sports betting, particularly the BetMGM agreement in Missouri, position Century Casinos to capture incremental digital gaming revenue and align with expanding legalized betting markets, which is expected to improve both revenue and earnings stability starting in 2026.
  
• Recent investments in property upgrades, hotel additions, and enhanced amenities (notably in Missouri and Canada) are already driving higher visitation, increased regional draw, and higher spend per customer, which is likely to boost top-line revenue and net margins as operating leverage improves.
  
• Ongoing demographic tailwinds-with a significant portion of Century's customer base being seniors, alongside growing disposable income and increased deductions/benefits for this age group-support sustained demand and foot traffic at regional properties, positively impacting revenue growth prospects.
  
• The company's continued focus on cost control, operational improvements, and modernized marketing (e.g., targeted promotions, loyalty club innovation, and technology upgrades) is resulting in better operating efficiencies and improved EBITDAR margins, which should drive higher free cash flow and overall profitability.
  
• The launch of a formal strategic review of assets-including exploring asset sales, partnerships, or a potential sale of the company-suggests a catalyst for unlocking hidden asset value and optimizing capital structure, potentially leading to enhanced shareholder returns and rerating of the stock's valuation multiples.

Century Casinos Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Century Casinos's revenue will grow by 5.5% annually over the next 3 years.
• Analysts are not forecasting that Century Casinos will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Century Casinos's profit margin will increase from -18.4% to the average US Hospitality industry of 8.0% in 3 years.
• If Century Casinos's profit margin were to converge on the industry average, you could expect earnings to reach $54.3 million (and earnings per share of $1.94) by about August 2028, up from $-105.9 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 2.7x on those 2028 earnings, up from -0.7x today. This future PE is lower than the current PE for the US Hospitality industry at 23.3x.
• Analysts expect the number of shares outstanding to decline by 2.16% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.32%, as per the Simply Wall St company report.

Century Casinos Future Earnings Per Share Growth

Risks

• High leverage and ongoing debt servicing requirements (net debt of $252.5 million, net debt-to-EBITDA ratio of 6.2x; lease-adjusted 7.3x) may constrain free cash flow and limit Century Casinos' ability to invest in growth opportunities or weather industry downturns, negatively impacting future net margins and earnings.
  
• Geographic revenue concentration and risk exposure in regional gaming markets (notably reliance on Missouri, Canada, and Poland), along with plans to divest Poland, could increase vulnerability to regulatory changes and economic headwinds specific to local markets-potentially reducing revenue streams and increasing earnings volatility.
  
• Ongoing competitive pressures in regional gaming (notably from larger integrated resorts, local competitors, and new entrants in markets like Colorado and Illinois) heighten the risk of market share loss, requiring increased promotional spend and potentially compressing net margins.
  
• Shifting customer demographics and secular trends, where younger consumers express less interest in traditional casinos and physical gaming, pose a long-term risk to patronage and revenue growth, especially as a significant portion of Century's core base is made up of seniors (~1/3) whose spending patterns may be less resilient to changes.
  
• Risks related to weather disruptions, increased labor, insurance, and compliance costs (as seen with significant storm impacts in Missouri, West Virginia, and Maryland, plus higher property taxes in Colorado), as well as challenges in driving consistent event and conference revenue at properties like the Nugget, may lead to increased operating expenses and margin pressure over the long term.

Valuation

• The analysts have a consensus price target of $3.75 for Century Casinos based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $4.0, and the most bearish reporting a price target of just $3.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $675.5 million, earnings will come to $54.3 million, and it would be trading on a PE ratio of 2.7x, assuming you use a discount rate of 12.3%.
  
• Given the current share price of $2.38, the analyst price target of $3.75 is 36.5% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.