| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 47.49 | 327 |
| Intrinsic value (DCF) | 19.24 | 73 |
| Graham-Dodd Method | 3.76 | -66 |
| Graham Formula | 5.52 | -50 |
Accel Entertainment, Inc. (NYSE: ACEL) is a leading distributed gaming operator in the U.S., specializing in the installation, maintenance, and operation of video gaming terminals (VGTs) and amusement devices in non-casino locations such as bars, restaurants, and convenience stores. Headquartered in Burr Ridge, Illinois, the company serves as a critical link between gaming operators and small businesses, offering turnkey gaming solutions that enhance customer engagement and revenue streams for its partners. As of December 2021, Accel operated 13,639 VGTs across 2,584 locations, primarily in Illinois, making it a dominant player in the regional distributed gaming market. The company also provides ATM services and other entertainment equipment, diversifying its revenue streams. Operating in the highly regulated gambling sector, Accel benefits from stable demand in the consumer cyclical industry while navigating stringent compliance requirements. Its asset-light, high-margin business model positions it well for scalable growth in both existing and new markets.
Accel Entertainment presents a compelling investment case due to its strong market position in Illinois' distributed gaming sector, high-margin recurring revenue model, and potential for geographic expansion. The company’s revenue of $1.23B (TTM) and positive operating cash flow ($121.2M) underscore its operational efficiency. However, risks include regulatory dependence (Illinois contributes most revenue), high leverage (total debt of $595.4M), and exposure to economic cyclicality (beta of 1.23). The lack of dividends may deter income-focused investors, but growth-oriented shareholders could benefit from Accel’s expansion into new states and its ability to monetize non-gaming entertainment offerings. The stock’s attractiveness hinges on regulatory tailwinds and execution in scaling beyond Illinois.
Accel Entertainment’s competitive advantage lies in its first-mover scale in Illinois’ distributed gaming market, where it operates over 13,600 terminals—a network effect that creates barriers to entry. Its vertically integrated model (terminal ownership, maintenance, and compliance management) ensures high margins (gross margins ~40%) compared to casino operators. The company’s focus on non-casino locations (e.g., bars, truck stops) differentiates it from traditional casino competitors, tapping into underserved demand for localized gaming. However, its regional concentration in Illinois is a vulnerability; competitors with multi-state footprints like IGT or Everi Holdings may have broader diversification. Accel’s partnerships with small businesses provide sticky revenue but require continuous regulatory lobbying. Its tech infrastructure (e.g., ATM-integrated redemption systems) offers operational efficiencies, though larger rivals may outperform in R&D for digital gaming. The competitive moat is regulatory rather than technological, relying on licenses and relationships with local establishments.