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About Flutter Entertainment
I’ve already written about Flutter Entertainment’s largest and most fierce competitor, DraftKings.
I guess one can already begin to deduce what it is exactly that Flutter does and what industry it plays in.
Or perhaps the industry that its millions of users play in.
I digress.
Headquartered in Dublin, Ireland, Flutter is a very prominent sports gambling company at its core, but in more respects than one it truly has become a technology company that just so happens to focus on serving those that like betting on outcomes within the context of a large and organized sporting event.
While DraftKings obviously has a far better initial ring to one’s ears in terms of brand presence, Flutter has a lot of lesser-known brand power of its own, as Flutter itself is the parent company of various sports betting and other gaming houses, such as its arguably most well respected, prized possession, FanDuel, along with other sports betting intermediaries like Paddy Power, Betfair, PokerStars, Sky Betting & Gaming, Sisal, tombola, Sportsbet, TVG, Junglee Games and Adjarabet.
Truth be told, out of all of these corporate components, I’ve only heard of FanDuel, and this is probably the case with you as well, especially if you are from the United States.
It is hardly shocking to find that Flutter generates revenues in the same form and fashion that DraftKings does, by charging gamers a portion of the bet(s) they place (often referred to as “bookmaking”), acting as a sort brokerage fee, which is most certainly reasonable, also generating revenues through charging users access to their portfolio of online casino-style games, and one could never neglect to mention that the company also offers more family-friendly gaming options like bingo, which are also offered on one’s mobile device as well.
If that wasn’t enough, Flutter also turns over some sales through its peer-to-peer play platforms, where instead of the most basic, common model, where players play against the house, Flutter has also made it so players can play and bet against one another. The gambling world certainly has become a lot larger than ever, as within the confines of the peer-to-peer model, the company affords players access to playing games like poker, fantasy sports, rummy, racing and a few other avenues that Flutter sincerely hopes you indulge in to your heart’s content.
In being as honest as humanly possible, I would love to be the guy to tell you that I think this company’s revenues are likely to be hampered by economic distress across the globe, but given the nature of gambling and the continual rise of sports betting, I still think many are likely to continue betting even when they can most certainly not afford to, and, oddly enough, that is the exact reasoning behind why I think they will continue betting, hell or high water.
Namely, as people’s economic conditions worsen and it becomes harder and harder to pay one’s bills, desperation kicks in and what better avenue to consider than to put in the last few hundred or so dollars that you have in your emergency fund and put it into the basketball or football game happening tonight, or perhaps tapping into the hot streak you’ve recently had when playing against your online poker buddies?
Everyone’s hot until they’re not.
While it is frankly quite depressing to think about, these are the facts that one must absolutely contend with and consider, however, the proof will be in the financial pudding of Flutter Entertainment, so without further adieu, let’s unveil the company’s financial curtain and learn about this firm as a possible investment opportunity.
Flutter’s stock financials
Flutter Entertainment plc is a $41.93 billion gambling and gaming company with a stock price of $235.91, along with no annually distributed dividend offered to its shareholders at the moment and it is also lacking a price-to-earnings (P/E) ratio, implying that this company is not currently net profitable, which, for better or worse, does make sense.
More specifically, if my initial estimations are correct, Flutter is probably growing its revenues by a fair amount annually and being that I view this as being a technology company that just so happens to specialize in gaming, the company is likely putting a lot of capital to work and with growth usually comes a more muted net profit margin, if there’s even one to be had, as this is simply a common sacrifice a company like this one has to make in order to grow its market share and revenue base, which I vouch for and think it truly must focus on being just how increasingly competitive the space has become.
Of course, if the company is not net profitable during the time of the publication of this stock analysis article, it would be all the more difficult for it to justify paying a consistent dividend to its shareholders, therefore I have no qualms when it comes to this company not paying its investors a quarterly gift that would more than likely end up being a long-term curse.
Moving onto the condition of the company’s balance sheet, Flutter Entertainment’s executives are steering a ship of $24.6 billion in terms of total assets and nearly $14.6 billion in terms of total liabilities, which is candidly much better of a balance sheet structure than I initially anticipated, especially if I find that the company is growing on the basis of revenues, as Flutter most definitely has carved out a great deal of financial freedom and wherewithal in terms of being able to continue expanding its operations globally.
Regarding the company’s income statement, you can bet your bottom dollar (believe me, Flutter Entertainment would love it if you did) that Flutter has been growing its annual revenues throughout 2019 and 2023, at a very impressive rate, I might add.
For instance, the company’s revenues in 2019 were reported as $2.7 billion, rising the following year to $5.6 billion, $8.3 billion in 2021, $9.4 billion in 2022, accelerating towards its latest displayed figure (on Charles Schwab’s platform) of just about $11.7 billion, as reported at the end of 2023.
Nearly growing one’s revenues six times over while also maintaining a more than sufficiently total asset-heavy balance sheet is sort of incredible.
And by sort of I mean it really is.
While I have my fair share of hunches that Flutter Entertainment is not currently profitable, given its lack of a price-to-earnings ratio and its rapidly growing revenues, it is proving itself to be a growth company, no doubt about it, and as long as the company isn’t bleeding too much cash in obtaining the aforementioned excellent revenue growth, I can live with the company being without a (net) profit for a few years if it means it will continue growing like it has been for the last few years.
As it relates to the company’s cash flow statement, Flutter’s total cash from operations, also measured during and between 2019 and 2023, have, once again, to my unequivocal surprise (seriously), been positive each and every year, fluctuating a good deal during this timeframe but all I was really looking for was the company to not be losing too much cash, but it doesn’t seem as though it is losing any at all, on the primary basis of its total cash from operations.
In digging more into these figures, the company’s total cash from operations have ranged between a relative low of $535 million (2019) and a high of a hair under $1.3 billion, as reported in 2020, which is a pretty healthy range, especially in the sense that $535 million, even though it is this company’s range floor, is a great relative low, and I also like that both the company’s revenues and associated cash flows show that Flutter was able to perform quite well during the course of COVID-19, which makes inherent sense given the amount of stimulus checks given (and subsequently wasted on ultra-discretionary spending such as gambling) along with the fact that a lot of people just didn’t have much else to do, so they just picked up gambling for a not-so-cheap thrill.
All things considered within this section of this stock analysis, I have been counted wrong repeatedly so far, as Flutter’s cash flows have been, well, flowing, and its revenues have been growing at a seriously great rate as well.
Flutter’s stock fundamentals
Now, when it comes to the company’s listed net profit margin (as also displayed on Charles Schwab’s platform), Flutter’s is technically in the red, specifically sitting at -9.70%, which sort of goes with the whole growth and associated profit sacrifice I alluded to earlier within this article, and given that it has now been established that the company’s annual revenues over the last five years have been growing impeccably, and with that, its overall market share and digital presence, when also considering that Flutter does have the ability to produce cash from its operations, this is a currently worthy sacrifice in my book. Primarily, this company could be net profitable if it wanted to, but it would be required that the company taper off its growth, allowing the competition a critical edge, and this is the last thing that Flutter should want nor needs.
I will say that it has been reported that one of Flutter Entertainment’s highest operating costs lies within its marketing department, which is sensible in that in order to continue growing its size and scale globally, the ad spend has to go up, which is invariably going to eat a bit into the company’s margins, and it would also be wise to briefly consider the currency impacts that this company is prone to incurring. Namely, being a foreign business operator, Flutter has to repatriate its revenues and income, and when the currency tide turns, a company such as this one can incur some short-term losses, yet another profit hampering mechanism, this one clearly being out of the company’s control.
Should you buy Flutter Entertainment stock?
Nevertheless, even when throwing the company’s negative net profit margin into the mix, it is eerily close that of DraftKings’, which stands at -9.45%, which is a positive in the sense that Flutter is still competitive with its most threatening competitor.
Plus, I deem the aforementioned expenditures as being nothing but mission and growth critical to Flutter, and as a prospective shareholder with the long-term always on the horizon, I don’t mind the money it is spending and the steps it is taking to further solidify its prowess in the gaming markets it serves.
The company has a grand balance sheet that is apparently just about ready for anything and everything, not to mention its incredible recent revenue growth, positive cash flows and how it is in the process of tangibly setting itself up for future success, in my humble opinion, and a sad yet nevertheless true fact of the matter is that online gambling is very, very addictive and once users put on a few parlays on any one of the company’s portfolio of gaming platforms, they aren’t likely to check out.
Therefore, it seems most reasonable to lend the company’s stock a “buy” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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