PENN

We rate PENN Entertainment, Inc. (PENN) as Avoid with a composite score of 28.7/100 at a current price of $12.70. The stock falls in the bottom quintile of our universe across key quantitative factors, and the multi-factor weakness suggests a high probability of continued underperformance.

The rating is primarily driven by strength in stability (41th percentile) and investment (28th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (20th percentile) and quality (21th percentile) tempers our overall conviction. We assign a No Moat rating (23/100), Very High uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; balance sheet deleveraging progress; the path to profitability. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

PENN Entertainment, Inc. holds a top-quartile position (#0 of 50) within the Retail Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 28.7/100 places it at rank #4611 in our full 7,333-stock universe. At $2.8B in market capitalization, PENN Entertainment, Inc. is a mid-cap player in the Retail Trade space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 3%, though momentum at the 20th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 34% (-2.2pp vs sector) narrow to operating margins of -9% (-12.4pp vs sector) and net margins of -11.8%, yielding a gross-to-net conversion rate of -35%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $12.70, PENN Entertainment, Inc. is trading at a premium to fundamental value. Our value factor score of 26/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at P/B of 0.9x, P/S of 0.3x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a Very High uncertainty rating to PENN Entertainment, Inc.. The stock exhibits multiple compounding risk factors: elevated market sensitivity (beta of 1.67), significant leverage (146% debt-to-equity), current negative profitability (net margin -11.8%). The extreme uncertainty around future cash flows makes precise valuation difficult, and the range of outcomes is exceptionally wide. Only investors with high risk tolerance and extended time horizons should consider this name.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.67); significant leverage (146% debt-to-equity); current negative profitability (net margin -11.8%); weak quality scores (21th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 41th percentile and quality factor at the 21th percentile provide a quantitative summary of the overall risk landscape.

We identify limited risk mitigants at this time, which contributes to our very high uncertainty assessment. Investors should monitor for improvement in balance sheet metrics, margin stability, and business predictability that could warrant a downgrade in our risk assessment over time.

We rate PENN Entertainment, Inc.'s capital allocation as Poor. Key concerns include low returns on equity (-41.4%), negative profitability, weak asset returns (ROA -5.7%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — PENN Entertainment, Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, PENN Entertainment, Inc. receives a Avoid rating with a composite score of 28.7/100 (rank #4611 of 7,333). Our quantitative framework assigns a No Moat (23/100, trend: stable), Very High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 27/100.

Our analysis does not support a constructive view on PENN Entertainment, Inc. at this time. The combination of limited competitive advantages, very high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.