Flutter's Strong Q2 Performance Boosts Shares by 8.1%
Shares of Flutter Plc jumped significantly on Wednesday following the announcement of a strong second-quarter performance that surpassed market expectations. By 5:25 am, the shares were trading 8.1% higher at £15,835, indicating a positive investor sentiment driven by the company's recent results.
Analysts' Positive Take on Growth
According to analysts from Jefferies, "A consistent story of growth and market share gains is not reflected in the current Flutter valuation." This indicates that the market might not fully appreciate the company's robust financial health and growth potential.
Future Growth Projections
The company's compound Group EBITDA growth rate is projected at around 20% until 2030. EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, which is a measure of a company's overall financial performance. Flutter's forward EV/EBITDA multiple is 12.3x for FY25E, and they anticipate a 4.5% free cash flow yield. The EV/EBITDA multiple is a commonly used valuation metric that compares a company's enterprise value to its earnings.
Key Drivers in the US Market
The US market continues to be a significant driver for Flutter's growth. The company experienced positive cohort development, higher hold rates, and substantial market share gains. In fact, Flutter increased its US EBITDA guidance by $30 million, despite a $50 million setback due to a new Illinois tax.
International Performance and Strategies
Globally, Flutter has demonstrated robust growth, particularly in regions like the UK, Ireland, Italy, Georgia, Spain, and Brazil. Although the Australian market faced some challenges in racing, the sports betting segment showed considerable promise.
A strategic move by Flutter to moderate its generosity and local marketing efforts, as a response to increased US taxes, was well-received. Rather than introducing a surcharge, this approach aims to offset 50% of the tax cost by FY25E.
Financial Health and Future Plans
Jefferies highlighted Flutter's strong financial position, noting a net debt to EBITDA ratio of 2.6x, which is close to its target range of 2.0-2.5x. As the company continues to generate substantial surplus cash flow, share buybacks are expected to commence from FY26E onwards.
In summary, Flutter's strong Q2 performance and strategic market maneuvers position it well for sustained growth, with impressive projections and a positive outlook enhancing investor confidence.
