Shares in online gaming operator Stride Gaming (LSE: STR) have risen by over 12% today after it released an encouraging trading update. It provides details on the company’s future outlook, as well as whether it’s a better buy than sector peer William Hill (LSE: WMH).

Stride Gaming’s full year to 31 August was better than expected, with its second half being particularly strong. The company now expects its results to be ahead of market expectations. For example, net gaming revenue will be no less than £47m for the year and EBITDA (earnings before interest, tax, depreciation and amortisation) will be no lower than £12.3m for the full year, notwithstanding that the previous year contained only nine months of the Point of Consumption tax.

A key reason for the strong performance has been organic growth from Stride Gaming’s existing business. It is also focused on integrating the acquisitions of Tarco Assets, Netboost Media and 8Ball Games into the business and delivering on the anticipated synergies from the deals.

Looking ahead, Stride Gaming is forecast to increase its bottom line by 7% next year. This puts it on a price-to-earnings growth (PEG) ratio of 1.7, which indicates that it offers good value for money. And with it now being the fourth biggest online bingo operator in the UK, Stride Gaming has size and scale advantages that could positively catalyse its growth over the long term.

Value for money

However, sector peer William Hill offers better value for money. It’s forecast to increase its bottom line by 9% in the next financial year and this puts it on a PEG ratio of just 1.3. This indicates that William Hill offers more growth at a better price and its share price could outperform that of Stride Gaming.

Furthermore, William Hill is a larger operator than Stride Gaming and this provides it with advantages over its sector peer in what is becoming an increasingly competitive gaming space. In fact, sector consolidation is taking place and William Hill was itself the subject of a bid approach by Rank and 888  that ultimately didn’t work out. However, it shows that William Hill may prove attractive to other companies, which may have a positive impact on its share price.

Certainly, William Hill has endured a challenging period. It’s making major changes to its business in response to a disappointing period of results. While they will take time to have an impact on its bottom line, it seems to be moving in the right direction.

With William Hill yielding 4.1% versus 0.9% for Stride Gaming from a dividend covered 1.8 times versus 7.5 times for Stride Gaming, William Hill offers a superior income return over the medium term. As such, and while both stocks could be worth buying for the long term, William Hill is still the better buy.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.