Entain’s investors have faced a turbulent journey over the last few years, marked by a series of leadership changes that involved two CEOs leaving in less than 18 months.

Jette Nygaard-Andersen departed in December 2023 after three years leading the company, which includes brands like Ladbrokes and Sportingbet. Following a thorough search for her replacement, Entain appointed seasoned industry figure Gavin Isaacs, who stepped in from the interim CEO role held by Stella David in September.

However, Isaacs’ departure after just five months raised concerns about the board’s decision-making and overshadowed some positive trends in the company’s financial results.

Stella David returned as interim CEO in February and was later confirmed as the permanent chief executive in April, reducing management uncertainty that had troubled investors.

David’s permanent role has been welcomed by stakeholders, primarily because of her effective strategies that have contributed to the group’s turnaround, particularly in its operational efficiency and customer engagement initiatives.

As a result, Entain recorded a 7% increase in total net gaming revenues, reaching £5.16 billion for the year ending December, with UK and Ireland online gaming revenues exceeding expectations for year-over-year growth in the third quarter.

The spending per customer in UK sports and gaming also rebounded towards the end of last year for the first time since early 2021. The earnings, excluding taxes and charges for the period, reached £1.09 billion, hitting the upper limit of forecasts.

For the current financial year, the company anticipates adjusted earnings of around £1.1 billion, in line with analysts’ forecasts. UBS analysts describe this fiscal year as potentially transformative for the firm, predicting that Entain will surpass its online revenue growth guidance, targeting over 6% growth.

Despite a recent uptick in share prices, Entain’s stock is still significantly below its peak of £23.77 reached in September 2021, which represented a forward earnings multiple of 43. As of Wednesday’s close, shares were priced at 751p, reflecting a more reasonable forward earnings multiple of just under 14.

Considering anticipated earnings growth over the next two years, Entain’s price-to-earnings growth ratio stands at 0.3, well below the preferred benchmark ratio of 1, indicating potential for good value.

Founded in 2004 as GVC Holdings by Kenny Alexander, Entain has evolved into a formidable player in the global betting industry through numerous acquisitions, now owning brands like BetCity, Coral, Eurobet, Foxy Bingo, Gala, and Partycasino.

A significant driver for future share value will be its expansion strategy in the US market, with a goal of securing a 20 to 25 percent market share. Since the removal of restrictions seven years ago, sports betting in the US has surged, evolving rapidly.

The competitive landscape is robust, with Flutter-owned FanDuel and DraftKings capturing around 37 percent each of the US sports betting market, as reported by Barclays. BetMGM holds approximately 14 percent, with its user base rising significantly; it reported a 14 percent increase in average monthly users to 946,000 in 2024.

BetMGM expects to achieve profitability this year, projecting revenues between $2.4 billion and $2.5 billion, which Berenberg analysts consider a conservative estimate. They have increased their full-year revenue prediction to £2.55 billion.

While facing stiff competition, Entain’s growth opportunities in the US appear promising, and with its management issues now resolved and a positive trajectory underway, the company may represent a worthwhile investment choice.

Recommendation: Buy

Rationale: Growth prospects are not yet fully reflected in share prices.