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Gambling.com Group (GAMB) Good Results and Appears Undervalued (Q3 2024 Earnings)

Gambling.com Group (GAMB) has garnered attention with recent financial results and a valuation that suggests it may still offer strong investment potential. Known for providing digital marketing services for the online gambling sector, GAMB has shown consistent growth in revenues and profits, highlighting its resilience and adaptability in a competitive market. Here, we’ll explore the company’s profile, recent financial performance, stock price trajectory, valuation, growth potential, and the risks associated with investing in this stock.

Online Gambling

1. About Gambling.com 

Gambling.com Group is a performance marketing company specializing in the online gambling industry. The firm operates through its proprietary technology, content, and data expertise to guide online gamblers to regulated betting websites. By collaborating with licensed operators, GAMB earns a portion of revenue from leads generated through its platforms. Established in 2006 and based in the Isle of Man, the company has extended its reach across Europe and North America, making it one of the top players in the gambling affiliate marketing space.

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2. Gambling.com Financial Performance

In its most recent quarterly results (Q3 2024), Gambling.com Group posted revenue of $32.12 million, up from $23.46 million in Q3 2023—a significant 36.92% year-over-year increase. The company’s TTM (trailing twelve months) revenue also saw strong growth, reaching $124.4 million, up from $97.47 million in the same period last year, marking a 27.63% increase. This surge in revenue reflects the effectiveness of GAMB’s strategies, which include optimizing customer acquisition costs and strengthening partnerships in regulated gambling markets.

The company’s earnings per share (EPS) also exhibited impressive growth. Quarterly EPS for Q3 2024 reached $0.24, up from $0.13 in Q3 2023, an 84.62% year-over-year increase. On a TTM basis, EPS climbed to $0.78 compared to $0.19 a year prior, a remarkable 305.17% increase. This substantial EPS improvement underlines the company’s profitability and operational efficiency. Additionally, GAMB’s free cash flow per share (TTM) grew by an impressive 134.88%, rising to $1.01 from $0.43 in Q3 2023. This boost in free cash flow is a critical indicator of financial health, demonstrating GAMB’s ability to generate cash and sustain growth.

These financial gains showcase GAMB's operational capabilities and support its case as a growth-focused investment opportunity, even within the dynamic online gambling industry.

3. GAMB Stock Price Performance and Valuation

At its current price of $12 per share, GAMB’s stock is down 6% over the past year, creating an attractive buying opportunity for investors who see value in its long-term growth prospects. The stock’s valuation ratios are competitive: it trades at a price-to-sales (P/S) ratio of 3.67, a trailing price-to-earnings (P/E) ratio of 16, and a forward P/E ratio of 14. These metrics suggest that the stock is priced reasonably in relation to its earnings and revenue growth, especially compared to many growth-oriented peers in the tech sector.

Furthermore, GAMB’s price-to-free-cash-flow (P/FCF) ratio stands at 12, indicating robust cash flow generation. This solid cash position relative to its valuation underpins the stock’s attractiveness for investors seeking both stability and growth. Overall, GAMB’s valuation ratios indicate that despite some recent share price decline, the company remains undervalued, especially when considering its potential for continued revenue and earnings expansion.

4. Gambling.com Growth Potential

Gambling.com Group’s growth potential stems from the continued expansion of online gambling and sports betting markets, particularly in the United States, where legalization is still expanding on a state-by-state basis. The company’s innovative approach to affiliate marketing, combined with a data-driven strategy to capture and retain users, allows it to stay ahead of industry trends. As more states regulate online sports betting, GAMB has opportunities to expand its client base and capitalize on increased demand for regulated gaming content.

Additionally, GAMB has invested in technology to improve customer acquisition and engagement strategies, a critical advantage as it scales into new regions. The rising popularity of sports betting, along with the shift of consumer behavior toward online platforms, further supports the company’s future growth. GAMB’s established reputation also positions it well to continue forming strategic partnerships, which will aid in securing a competitive edge in this dynamic industry.

5. Risks to Consider

While Gambling.com Group shows significant potential, it is not without risks. Regulatory risks are a primary concern, as changes in gambling legislation could impact the company’s operations and revenue streams. In regions where online gambling remains unregulated or restricted, there’s a risk that potential revenue opportunities could be constrained. Additionally, intense competition from other online gaming affiliates and digital marketing firms could challenge GAMB’s growth if they capture market share through competitive pricing or technological advancements.

Currency fluctuations and economic downturns also pose risks, as they could reduce disposable income among consumers, affecting overall spending on gambling activities. However, the company's strong balance sheet and healthy cash flow make it well-equipped to handle these challenges, providing some reassurance to investors despite these potential risks.

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Conclusion

Gambling.com Group (GAMB) presents an intriguing opportunity for investors looking to tap into the growth of the online gambling industry. With strong financial results, an expanding market, and a solid stock price trajectory, GAMB appears to be undervalued relative to its growth potential. While regulatory and competitive risks exist, the company’s resilient performance and robust free cash flow are reassuring indicators of its capability to adapt and thrive.

In summary, GAMB’s valuation, growth metrics, and position in a rapidly growing industry make it a compelling investment choice for those willing to accept the risks. As long as the regulatory landscape continues to favor expansion, Gambling.com Group has the potential to deliver strong returns over the long term.

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