How PENN Stock Stacks Up After ESPN Bet Rollout and 7% Monthly Drop

If you have been eyeing PENN Entertainment and wondering whether it deserves a spot in your portfolio, you are not alone. Investors everywhere are trying to decode the recent moves in this stock and decide if the clouds will finally part for a brighter future. Over the past week, shares dipped by 4.0%, and in the last month, they have slipped 7.2%. Even the year-to-date return sits slightly negative at -1.2%. Yet, despite this muted near-term action, PENN Entertainment stands out for a much bigger long-term story. Over three years, the stock is down 38.1%, and over five years, it has lost 70.6% of its value. Such major swings rarely happen for no reason, but often, they spell opportunity for patient investors looking for a bargain.

These sharp price declines have unfolded against the backdrop of changing market confidence around the broader gaming and entertainment sector, as investors reevaluate risk and growth potential. The key question now is whether PENN has become undervalued as a result. Here is where things get interesting: by running the numbers through several valuation checks, PENN scores a 5 out of 6. This means it appears undervalued on most metrics.

In just a moment, I will break down exactly how those valuation methods stack up against each other. But there is an even more compelling way to size up PENN’s true worth, and we will get there by the end of the article.

Why PENN Entertainment is lagging behind its peers

Approach 1: PENN Entertainment Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's true worth by projecting its future cash flows and discounting them back to present value. This approach gives investors a clearer picture of what a company's underlying operations are actually worth today, rather than only focusing on short-term earnings or market sentiment.

For PENN Entertainment, the most recent reported Free Cash Flow stands at $25.2 Million. Analyst expectations point to significant growth, with cash flows forecast to rise to $444 Million by the end of 2027. Looking further ahead, cash flows could surpass $1 Billion annually within about a decade, according to both analyst estimates and trend assumptions.

Using this data, the DCF model calculates an intrinsic value of $86.21 per share. With PENN's current market price trading at roughly a 78% discount to this fair value estimate, the stock appears deeply undervalued on a long-term cash flow basis.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for PENN Entertainment.

Our Discounted Cash Flow (DCF) analysis suggests PENN Entertainment is undervalued by 78.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: PENN Entertainment Price vs Sales

The Price-to-Sales (P/S) ratio is a widely used valuation metric, especially for companies like PENN Entertainment that may have volatile or negative earnings but still generate significant revenue. This multiple allows investors to compare a company’s market value relative to its sales, making it a practical tool when profits are inconsistent or undergoing turnaround.

Typically, growth expectations and business risks play sizable roles in shaping what counts as a “normal” or “fair” P/S ratio. Fast-growing companies or those with high margins generally deserve a premium multiple, while higher risks or slow growth warrant a discount. For context, PENN Entertainment currently trades at a P/S ratio of 0.40x. This is well below the hospitality industry average of 1.72x and is also lower than the peer average of 2.64x, indicating the stock is priced at a substantial discount to both its sector and competitors.

To refine the analysis, Simply Wall St’s proprietary Fair Ratio model estimates what would be an appropriate multiple for PENN today. This model takes into account not just traditional benchmarks but also future earnings growth, industry conditions, profit margins, company size, and risk. This more nuanced "Fair Ratio" approach eliminates much of the guesswork, offering a clearer picture than simply comparing with peers or the wider industry. For PENN, the Fair Ratio is calculated to be 1.24x. Since this is markedly higher than the current P/S of 0.40x, the stock appears meaningfully undervalued when assessed through this lens.

Result: UNDERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your PENN Entertainment Narrative

Earlier, we mentioned there is an even better way to understand a company’s true worth — and that is through Narratives. Simply put, a Narrative is your story about PENN Entertainment: your view of its future growth, margins, and fair value, shaped by how you interpret recent news, industry shifts, and bold company moves.

Narratives connect the dots from business updates and forecasts to a valuation anchored in your assumptions. This approach makes analysis far more personal and actionable than simply following static metrics or consensus targets.

On Simply Wall St’s Community page, anyone can create and update a Narrative, connecting with millions of other investors. This tool lets you transparently spell out why you think PENN is undervalued or overvalued. It also helps you compare your fair value with the latest share price as well as methods like Discounted Cash Flow or peer multiples, so buy or sell decisions feel grounded in real-world views.

Importantly, Narratives update dynamically as new earnings reports or breaking news come in. This means your thesis stays relevant even in a fast-moving market. For example, right now investor Narratives around PENN Entertainment range from bullish estimates built on rising ESPN integration and omni-channel growth that value the company at $30 per share, to more cautious stories that highlight legacy market risks and assign a fair value as low as $17 per share.

Do you think there's more to the story for PENN Entertainment? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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