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Why I think this FTSE stock is worth a gamble

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When analysing companies for investment viability I look at a few specifics. These include performance, past and present leadership, growth strategy, and risk appetite.

I am also a big sporting fan, so I look for similar traits in my favourite teams or players if I decide to have a little flutter. 

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This leads me nicely to a stock that I think could present a unique, crash-proof investment opportunity. 888 Holdings (LSE:888) is my gambling and casino pick during this current market crash.

The cancellation of sporting events around the world will impact this industry. However, I expect there will be an offsetting increase in customer demand for online casino and poker products.

Market crash

888 has not lost much momentum in this market crash. In fact, its pre-crash share price from early February was around the 135p mark. As I write this, the per share price is over 140p. 

The lockdown is having a knock-on benefit for the gambling firm. It reported its best day ever at the end of March, with a 20% jump in customer numbers as people were forced to stay indoors. 

Full-year results

Yesterday saw the announcement of 888’s full-year results to 31 December 2019. Revenue was up 4% compared to last year but there was a drop in pre-tax profit. Last year’s $108.7m was followed by this year’s figure of $45.3m, a difference of near 60%. There was an increase in revenue across all segments, which are casino, sport, poker, and bingo. It is always encouraging when all divisions of a company are doing well in tandem.

The dip in profit is not a concern for me. An increased presence in the UK and expansion into new territories affected the company’s profitability. The increased overheads linked to the Betbright acquisition also contributed. 

The word ‘acquisition’ always ticks a box in the virtual viability checklist I have in my head. It indicates strategy, and willingness to grow and expand. Most investors I know would tend to agree.

888 also maintained its plans for 2020 to expand further into the US market. It plans to strengthen its team, marketing, and product in the coming year. Its appetite for merger and acquisition opportunities is also strong, despite the economic uncertainty. All the right noises are being made, although it remains to be seen if the plans will bear fruit. 

There is also the small matter of $52m cash reserves. It looks like the company won’t need that right now, unlike to many other companies out there.

What I would do now

With a price-to-earnings ratio of 11, the 888 stock does not represent a risk for me. In fact, if current trends of increasing demand continue, the stock could be seen as undervalued.

I feel there is a bargain to be picked up here. Historically, 888’s share price has been much higher than current levels. Rewind two years ago and the share price was more than double its current level, trading near 320p per share. It might be one worth a look.

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Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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