Bally's (BALY)

Gaming, betting and entertainment company Bally's Corporation (NYSE:BALY) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 28.6% year on year to $746.2 million. Its GAAP loss of $5.84 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.

The Consumer Discretionary sector, by definition, is made up of companies selling non-essential goods and services. When economic conditions deteriorate or tastes shift, consumers can easily cut back or eliminate these purchases. For long-term investors with five-year holding periods, this creates a structural challenge: the sector is inherently hit-driven, with low switching costs and fickle customers. As a result, only a handful of companies can reliably grow demand and compound earnings over long periods, which is why our bar is high and High Quality ratings are rare.

Casino operators run gaming resorts and facilities that generate revenue from gambling, hospitality, food and beverage, and entertainment offerings. Tailwinds include pent-up travel demand, expansion into new jurisdictions legalizing gaming, and growing interest in integrated resort developments in Asia and the Middle East. However, the industry faces notable headwinds: heavy regulatory and licensing requirements limit operational flexibility, capital expenditure for property development and renovation is substantial, and revenue is highly sensitive to macroeconomic conditions and consumer confidence. Rising competition from online gambling platforms, regional saturation in mature markets, and geopolitical risks in key international jurisdictions add further uncertainty.

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

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Luckily, Bally’s sales grew at a solid 48.3% compounded annual growth rate over the last five years. Its growth beat the average consumer discretionary company and shows its offerings resonate with customers.

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. Bally’s recent performance shows its demand has slowed as its annualized revenue growth of 4.6% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. Note that COVID hurt Bally’s business in 2020 and part of 2021, and it bounced back in a big way thereafter.

This quarter, Bally's reported robust year-on-year revenue growth of 28.6%, and its $746.2 million of revenue topped Wall Street estimates by 11.5%.

Looking ahead, sell-side analysts expect revenue to grow 6% over the next 12 months, similar to its two-year rate. While this projection indicates its newer products and services will catalyze better top-line performance, it is still below the sector average.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Bally’s operating margin has generally stayed the same over the last 12 months, averaging negative 7.8% over the last two years. Unprofitable, high-growth companies warrant extra scrutiny, especially if their profitability doesn’t improve. For the time being, it’s unclear if Bally’s business model is sustainable.

In Q4, Bally's generated a negative 24.1% operating margin.

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.

Bally’s earnings losses deepened over the last five years as its EPS dropped 119% 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 Q4, Bally's reported EPS of negative $5.84, down from negative $1.76 in the same quarter last 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 $11.39 will advance to negative $2.97.

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.

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 7.9%, meaning it lit $7.92 of cash on fire for every $100 in revenue.

Bally's burned through $56.7 million of cash in Q4, equivalent to a negative 7.6% margin. The company’s cash burn increased from $6.25 million of lost cash in the same quarter last year.

Over the next year, analysts predict Bally’s cash conversion will improve to break even. Their consensus estimates imply its free cash flow margin of negative 12% for the last 12 months will increase by 12.8 percentage points.

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 2.2%, 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. On average, Bally’s ROIC decreased by 4.8 percentage points annually each year over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Debt is a tool that can boost company returns but presents risks if used irresponsibly. As long-term investors, we aim to avoid companies taking excessive advantage of this instrument because it could lead to insolvency.

Bally’s $6.40 billion of debt exceeds the $906.7 million of cash on its balance sheet. Furthermore, its 11× net-debt-to-EBITDA ratio (based on its EBITDA of $497.7 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Bally's could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope Bally's can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

We were impressed by how significantly Bally's blew past analysts’ revenue expectations this quarter. On the other hand, its EPS missed and its EBITDA fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $12.16 immediately after reporting.

Updated: March 23, 2026 at 11:02 PM EDT

When considering an investment in Bally's, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

We see the value of companies helping consumers, but in the case of Bally's, we’re out. Although its revenue growth was solid 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 10.1x. While this valuation is reasonable, we don’t see a big opportunity at the moment. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $15.67 on the company (compared to the current share price of $12.16).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.