Accel Entertainment (NYSE:ACEL) Beats Q3 Sales Expectations

Looking ahead, sell-side analysts expect revenue to grow 4.9% over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and indicates its products and services will see some demand headwinds.

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Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Accel Entertainment’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 7.7% over the last two years. This profitability was paltry for a consumer discretionary business and caused by its suboptimal cost structure.

This quarter, Accel Entertainment generated an operating margin profit margin of 7.7%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Accel Entertainment’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q3, Accel Entertainment reported EPS of $0.16, up from $0.06 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

It was good to see Accel Entertainment beat analysts’ EPS expectations this quarter. We were also glad its number of video gaming terminals sold outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 2.4% to $10.16 immediately after reporting.

Accel Entertainment put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.