Shares of Gaming and Leisure Properties (GLPI) recently pulled back after concerns around the financial health of Bally’s, the company’s second largest tenant, drew investor attention to tenant risk and project financing progress.

Over the past year, Gaming and Leisure Properties has seen its share price drift lower, with the 90 day share price return down 9.68% and the 1 year total shareholder return down 3.25%. This points to fading momentum as investors reassess tenant and financing risks.

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For Gaming and Leisure Properties, the pullback could signal deeper concern about tenant concentration risk or simply a swing in sentiment around Bally’s headlines. The next step is to see what the current valuation actually reflects.

Price-to-Earnings of 12.9x: Is it justified?

On a simple earnings lens, Gaming and Leisure Properties looks inexpensive. The stock closed at $42.90 while trading on a P/E of 12.9x that screens as good value against several benchmarks.

The P/E ratio compares the current share price to earnings per share. For a REIT like Gaming and Leisure Properties, it is a quick way to see how much investors are paying for each dollar of earnings that come from its triple net leases and related income.

According to the checks provided, GLPI is viewed as good value with a 12.9x P/E compared to an estimated fair P/E of 33.6x. It is also described as good value relative to the North American Specialized REITs industry average P/E of 25.6x and a peer average of 17.9x. That is a wide gap and suggests the market is pricing Gaming and Leisure Properties at a clear discount to both its own fair ratio and to similar REITs.

The combination of a lower P/E than peers and an estimated fair ratio that is significantly higher points to meaningful upside potential if sentiment toward the stock and its earnings profile were to move closer to those reference points. GLPI is also flagged as trading at good value compared to peers and the industry more broadly, which reinforces the message that the current multiple is on the cheap side of the range indicated by these comparisons.

Result: Price-to-Earnings of 12.9x (UNDERVALUED)

However, Gaming and Leisure Properties still faces tenant concentration risk around Bally’s and potential project financing setbacks that could quickly change how the current P/E is viewed.

Another view on Gaming and Leisure Properties valuation

On the SWS DCF model, Gaming and Leisure Properties screens as deeply undervalued. The shares trade at $42.90 while the model estimates future cash flow value at $99.21, or about 56.8% above the current price. If both P/E and cash flow point to undervaluation, what might the market be missing?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Gaming and Leisure Properties for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 52 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Given the mix of concern and optimism around Gaming and Leisure Properties, it makes sense to move quickly, review the data in full, and weigh both sides through the 5 key rewards and 2 important warning signs

Looking for more investment ideas beyond Gaming and Leisure Properties?

Do not stop with Gaming and Leisure Properties. Use this pullback as a prompt to refresh your watchlist and uncover other opportunities that match your style and risk comfort.

• Target reliable cash generators that combine income potential with staying power through the 12 dividend fortresses
• Hunt for quality stocks that trade below what their fundamentals suggest by checking the 52 high quality undervalued stocks
• Prioritise stability and sleep-at-night holdings by reviewing the 78 resilient stocks with low risk scores

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.