Golden Entertainment (GDEN)

Casino, tavern, and slot machine operator Golden Entertainment (NASDAQ:GDEN) missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 4% year on year to $154.8 million. Its GAAP loss of $0.18 per share was significantly below analysts’ consensus estimates.

Company Overview

Founded in 2001, Golden Entertainment (NASDAQ:GDEN) is a gaming company operating casinos, taverns, and distributed 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 in the gaming and entertainment sector include Boyd Gaming (NYSE:BYD), Caesars Entertainment (NASDAQ:CZR), and Red Rock Resorts (NASDAQ:RRR).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Golden Entertainment’s demand was weak over the last five years as its sales fell at a 2.5% annual rate. This wasn’t a great result and is a sign of lacking business quality.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Golden Entertainment’s recent performance shows its demand remained suppressed as its revenue has declined by 23.6% annually over the last two years. Note that COVID hurt Golden Entertainment’s business in 2020 and part of 2021, and it bounced back in a big way thereafter.

We can dig further into the company’s revenue dynamics by analyzing its three most important segments: Gaming, Dining, and Hotel, which are 49.8%, 25.6%, and 16.4% of revenue. Over the last two years, Golden Entertainment’s revenues in all three segments declined. Its Gaming revenue (Poker, Blackjack) averaged year-on-year decreases of 29.8% while its Dining (food and beverage) and Hotel (overnight stays) revenues averaged drops of 4.6% and 5.6%.

This quarter, Golden Entertainment missed Wall Street’s estimates and reported a rather uninspiring 4% year-on-year revenue decline, generating $154.8 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 1.2% over the next 12 months. Although this projection implies its newer products and services will catalyze better top-line performance, it is still below the sector average.

Golden Entertainment’s operating margin has shrunk over the last 12 months, but it still averaged 10.4% over the last two years, decent for a consumer discretionary business. This shows it generally does a decent job managing its expenses.

This quarter, Golden Entertainment’s breakeven margin was down 3.6 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Golden Entertainment’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q3, Golden Entertainment reported EPS of negative $0.18, down from $0.18 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Golden Entertainment’s full-year EPS of $0.18 to grow 292%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Golden Entertainment has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 4.3%, lousy for a consumer discretionary business.

Golden Entertainment’s free cash flow clocked in at $19.32 million in Q3, equivalent to a 12.5% margin. This result was good as its margin was 3.4 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends are more important.

Over the next year, analysts predict Golden Entertainment’s cash conversion will improve. Their consensus estimates imply its free cash flow margin of 8.4% for the last 12 months will increase to 12.4%, it options for capital deployment (investments, share buybacks, etc.).

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).

Golden Entertainment historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 13.9%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

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. Over the last few years, Golden Entertainment’s ROIC averaged 4.8 percentage point decreases each year. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Golden Entertainment reported $58.27 million of cash and $508.9 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $145.7 million of EBITDA over the last 12 months, we view Golden Entertainment’s 3.1× net-debt-to-EBITDA ratio as safe. We also see its $30.8 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Golden Entertainment beat analysts’ Gaming revenue expectations this quarter. We were also happy its Dining revenue narrowly outperformed Wall Street’s estimates. On the other hand, its Hotel revenue missed and its adjusted operating income fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock remained flat at $28.52 immediately following the results.

Updated: December 4, 2025 at 9:59 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Golden Entertainment.

We see the value of companies helping consumers, but in the case of Golden Entertainment, we’re out. First off, its revenue has declined over the last five years. On top of that, Golden Entertainment’s projected EPS for the next year is lacking, and its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Golden Entertainment’s P/E ratio based on the next 12 months is 54.8x. At this valuation, there’s a lot of good news priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $30.50 on the company (compared to the current share price of $28.38).