Bally's (BALY)

Gaming, betting and entertainment company Bally's Corporation (NYSE:BALY) missed Wall Street’s revenue expectations in Q3 CY2025, but sales rose 5.4% year on year to $663.7 million. Its GAAP loss of $1.70 per share was significantly below analysts’ consensus estimates.

Company Overview

Headquartered in Providence, Rhode Island, Bally's Corporation (NYSE:BALY) is a diversified global casino-entertainment company that owns and manages casinos, resorts, and online gaming platforms.

Casino operators enjoy limited competition because gambling is a highly regulated industry. These companies can also enjoy healthy margins and profits. Have you ever heard the phrase ‘the house always wins’? Regulation cuts both ways, however, and casinos may face stroke-of-the-pen risk that suddenly limits what they can or can't do and where they can do it. Furthermore, digitization is changing the game, pun intended. Whether it’s online poker or sports betting on your smartphone, innovation is forcing these players to adapt to changing consumer preferences, such as being able to wager anywhere on demand.

Competitors operating in the casino-entertainment sector include Caesars Entertainment (NASDAQ:CZR), MGM Resorts (NYSE:MGM), and Wynn Resorts (NASDAQ:WYNN).

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, Bally’s sales grew at an incredible 45.5% compounded annual growth rate over the last five years. Its growth beat the average consumer discretionary company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Bally’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 2% over the last two years was well below its five-year trend. Note that COVID hurt Bally’s business in 2020 and part of 2021, and it bounced back in a big way thereafter.

Bally's also breaks out the revenue for its most important segments, Gaming and Non-gaming, which are 82% and 18% of revenue. Over the last two years, Bally’s Gaming revenue (casino games, racing, sports betting) averaged 24.9% year-on-year growth while its Non-gaming revenue (hotel, food, retail) averaged 12.4% growth.

This quarter, Bally’s revenue grew by 5.4% year on year to $663.7 million, missing Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 13.3% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and suggests its newer products and services will fuel better top-line performance.

Bally’s operating margin has risen over the last 12 months, but it still averaged negative 11.5% over the last two years. This is due to its large expense base and inefficient cost structure.

In Q3, Bally’s breakeven margin was up 25.2 percentage points year on year. This increase was a welcome development and shows it was more efficient.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Bally’s earnings losses deepened over the last five years as its EPS dropped 76.2% annually. We tend to steer our readers away from companies with falling EPS, where diminishing earnings could imply changing secular trends and preferences. Consumer Discretionary companies are particularly exposed to this, and if the tide turns unexpectedly, Bally’s low margin of safety could leave its stock price susceptible to large downswings.

In Q3, Bally's reported EPS of negative $1.70, up from negative $5.10 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street expects Bally's to improve its earnings losses. Analysts forecast its full-year EPS of negative $7.31 will advance to negative $2.32.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Over the last two years, Bally’s demanding reinvestments to stay relevant have drained its resources, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 6.6%, meaning it lit $6.63 of cash on fire for every $100 in revenue.

Bally's burned through $161.2 million of cash in Q3, equivalent to a negative 24.3% margin. The company’s cash burn increased from $55.52 million of lost cash in the same quarter last year.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Bally’s five-year average ROIC was negative 0.8%, meaning management lost money while trying to expand the business. Its returns were among the worst in the consumer discretionary sector.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Bally’s ROIC has decreased significantly over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Bally's burned through $276.5 million of cash over the last year, and its $5.63 billion of debt exceeds the $239.9 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the Bally’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Bally's until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

We struggled to find many positives in these results. Its adjusted operating income missed and its EPS fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded up 2.1% to $16.65 immediately after reporting.

Updated: December 4, 2025 at 9:57 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Bally's, you should also grasp the company’s longer-term business quality and valuation.

Bally's falls short of our quality standards. Although its revenue growth was good over the last five years, it’s expected to deteriorate over the next 12 months and its declining EPS over the last five years makes it a less attractive asset to the public markets. And while the company’s projected EPS for the next year implies the company’s fundamentals will improve, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Bally’s EV-to-EBITDA ratio based on the next 12 months is 1.9x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $16.50 on the company (compared to the current share price of $17.55).