Is Flutter stock a buy?

Shares of Flutter Entertainment (NASDAQ:FLUT) have been on the move as of late, rising about 13% over the past month to around $280 per share.

The parent company of online sports betting leader FanDuel has been fueled by some recent catalysts, including the stock’s addition to the Russell MidCap Growth Index at the end of June.

Being part of the Russell MidCap Growth index is an important milestone for the company, as it boosts its overall profile as a leading midcap stock and gets it included in various ETF portfolios that track midcap stocks.

But that hasn’t been the only catalyst. The company also rolled out the next phase of its share buyback program on July 1. Through this initiative, Flutter will repurchase up to $225 million in Flutter shares. The idea is to reduce the amount of Flutter stock on the market. This, in turn, increases the earnings per share and typically boosts the share price.

Also, Flutter stock has recently earned some high-profile analyst upgrades. In late June, Cannacord initiated coverage of Flutter with a buy rating and $330 price target, according to the Fly. That would suggest about 18% upside from the current share price of $280 per share.

Canaccord analyst Jason Tilchen said the company enjoys a leading position in its markets, including in the U.S. with FanDuel. Plus, he cited Flutter’s execution, as it has been able to generate about 50% more revenue from each dollar wagered than its competitors. This is due to several factors, including pricing, product innovation, cross border sharing of best practices, and other factors.

Flutter gets upgrade from Citi

On July 2, Flutter got a slight upgrade from Citi, where analysts raised the price target to $343.94 from $343.47. It is only a 47 cent per share raise, but it still suggests significant upside for the stock. If Flutter stock hits that target over the next 12 months, it would translate into a 23% return over the current price.

The confidence may be due to Flutter’s solid first quarter earnings, when it generated an 8% increase in revenue to $3.6 billion and net income of $355 million, or $1.57 per share, up from a net loss of $289 million in the same quarter a year ago.

Or it was more likely due to its outlook, as Flutter raised its revenue and earnings guidance for the full fiscal year. The outlook calls for $17.08 billion in revenue, which would be up 22% year-over-year. The adjusted EBITDA guidance was boosted to $3.18 billion, a 35% year-over-year gain. Previously, Flutter had projected 14% revenue and 30% adjusted EBITDA growth.

The main driver for the increases is the acquisitions of two regional international betting sites – NSX from Brazil and Snai from Italy. These additions are anticipated to add $1.07 billion in revenue and $120 million in adjusted EBITDA.

Should you buy Flutter stock?

Given these growth projections, and nascent nature of sports betting in the U.S. and around the world, it is hard not to like where this market leader is heading.

One thing to watch is its valuation. Flutter stock is up a solid 8% YTD and 44% over the past year. Its P/E ratio is high at 96, but that is a little skewed due to the fact that Flutter hasn’t been profitable until recently.

The more important metric is the forward P/E ratio of 32, which is also a bit elevated, but certainly in a more reasonable range.

Longer term, the five-year P/E-to-growth, or PEG, ratio is a more attractive 0.22, which projects it to be a good value based on its expected future earnings. With the PEG ratio, anything under 1 is considered a value.

That suggests that analysts see continued strong earnings growth over the next several years, as the betting market grows and more states add sports gambling.

Given these trends, Flutter should be a stock that investors put on their radar, perhaps looking for a dip to get some more bang for their buck.