Is Boyd Gaming (BYD) Fairly Priced After Recent Share Price Weakness?

• If you are wondering whether Boyd Gaming is priced fairly or if the market is missing something, this breakdown will help you assess what you are really paying for at the current share price.
• The stock last closed at US$80.16, with a 1.1% decline over the past week and a 5.6% decline over the past month. Over longer periods, the 1 year return is 22.1%, and the 3 year and 5 year returns are 28.8% and 36.1% respectively.
• Recent attention on Boyd Gaming has focused on its share price performance over different time frames, with shorter term weakness contrasting with stronger multi year returns. This mix of shorter and longer horizon results has raised questions about whether sentiment or fundamentals are doing more of the work in setting the current price.
• At the moment, Boyd Gaming scores 2 out of 6 on a set of valuation checks. The rest of this article will walk through key valuation approaches and then finish with a broader way of thinking about what that score may represent for you.

Boyd Gaming scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Boyd Gaming Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model takes estimates of the cash Boyd Gaming might generate in the future, then discounts those cash flows back to today to arrive at an estimate of what the business could be worth right now.

For Boyd Gaming, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month Free Cash Flow is about $502.6 million. Analyst inputs and extrapolated estimates suggest Free Cash Flow figures in the mid to high $400 million range over the coming years, with a projected Free Cash Flow of $441.6 million in 2035 based on Simply Wall St extrapolations.

When all of those future cash flows are discounted back, the DCF model points to an estimated intrinsic value of about $78.86 per share. Compared with the recent share price of $80.16, that estimate suggests Boyd Gaming is around 1.7% overvalued, which is a very small gap and well within a reasonable margin of error for this kind of model.

Result: ABOUT RIGHT

Boyd Gaming is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

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

Approach 2: Boyd Gaming Price vs Earnings

For a profitable company, the P/E ratio is a useful way to see how much you are paying for each dollar of earnings, because it ties the share price directly to the business’s current profit generation.

What counts as a “normal” P/E depends on how fast earnings are expected to grow and how risky those earnings appear. Higher growth and lower perceived risk can justify a higher P/E, while slower growth or higher risk usually point to a lower, more cautious multiple.

Boyd Gaming currently trades on a P/E of 3.27x. That sits well below the Hospitality industry average P/E of 20.23x and the broader peer group average of 30.13x. Simply Wall St’s Fair Ratio for Boyd Gaming is 2.80x. This Fair Ratio is a proprietary estimate of what a reasonable P/E might be, given factors such as earnings growth, profit margins, industry, market cap and company specific risks.

The Fair Ratio can be more useful than a simple peer or industry comparison because it adjusts for Boyd Gaming’s own characteristics rather than assuming all companies should trade at similar levels. Comparing the Fair Ratio of 2.80x with the actual P/E of 3.27x suggests the shares are slightly overvalued on this metric.

Result: OVERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 20 top founder-led companies.

Upgrade Your Decision Making: Choose your Boyd Gaming Narrative

Earlier it was mentioned that there is an even better way to understand valuation. On Simply Wall St’s Community page you can use Narratives, where you set out your story for Boyd Gaming, link that story to your own forecast for revenue, earnings and margins, and see a fair value that updates automatically when new news or earnings arrive. You can then compare that fair value to the current price and decide how to act, whether you sit closer to the cautious analyst who sees value at about US$80.0 per share or the optimistic view closer to US$101.0, knowing that both are just different Narratives built from different assumptions using the same shared data.

Do you think there's more to the story for Boyd Gaming? Head over to our Community to see what others are saying!

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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