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We Forecast Higher Stock Return For Penn National Gaming vs. DraftKings

PENNDKNG Market Cap$7.1 Bil$5.8 BilLTM Revenue$6.3 Bil$1.7 BilCurrent P/S1.03.3Current P/EBIT5.7-3.8Stock Return Forecast (3Y)31%-7%

(a) P/S = Price to Sales (b) P/EBIT = Price to earnings before interest and taxes

3-Year Return Depends On [1] Revenue Growth [2] P/S

PENNDKNG LTM Revenue$6.3 Bil$1.7 Bilx Revenue Growth [1]15.3%7.3%= Revenue Forecast (3Y)$9.7 Bil$2.2 Bil x P/S [2]1.02.5 = Market Cap Forecast (3Y)$9.7 Bil$5.4 BilMarket Cap Today$7.1 Bil$5.8 Bil Stock Return Forecast (3Y)31%-7%

(a) P/S = Price to Sales (b) P/EBIT = Price to earnings before interest and taxes

[1] How Much Can Revenue Grow In Next 3 Years

Past revenue growth metrics that form basis of our expectation

PENNDKNG Recent Quarter Growth54.3%46.4%LTM Growth64.6%89.1%Growth During Covid-32.5%90.0%Pre-Covid Annual Growth24.8%-33.3% Annual Growth Forecast15.3%7.3%

(a) LTM = Last 12 months (b) Growth During Covid = Year 2020 growth

(b) Recent quarter growth refers to growth in recent quarter vs. the same quarter one year ago, commonly referred to as y-o-y growth

Penn National Gaming Revenue vs. DraftKings Revenue

PENN Revenue History & 3Y Forecast (53% cumulative growth)

DKNG Revenue History & 3Y Forecast (23% cumulative growth)

Note: The years shown in the charts above are fiscal years. => For DKNG, FY2021 refers to the fiscal year ending Dec 31, 2021 => For PENN, FY2021 refers to the fiscal year ending Dec 31, 2021

[2] Which P/S Scenarios Make Sense

P/S Scenarios & Corresponding 3-Year Returns (in brackets)

P/S & Return ScenariosPENNDKNG Current1.0 (36%)3.3 (24%)Expansion1.2 (64%)4.3 (61%)Contraction0.8 (7.6%)2.3 (-13%)Pre-Covid0.9 (17%)N/A (-100%)Historical AverageNANA Scenario Average1 (31%)2.5 (-7.2%)"Current" refers to ratio as of 4/29/2022

Note: Expansion/contraction considered from current / current('adjusted) P/S levels; NA imples invalid scenario because of extreme unsustainable values

Penn National Gaming P/S vs. DraftKings P/S

PENN P/S Ratio History

DKNG P/S Ratio History

P/S Ratio

Market RatiosPENNDKNG Current P/S1.03.3Current P/EBIT5.7-3.8

(a) P/S = Price to Sales (b) P/EBIT = Price to earnings before interest and taxes

Revenue Growth & Operating Margin

Financial MetricsPENNDKNG Revenue GrowthLast Q Sequential32.2%335%Last Q YoY54.3%46.4%LTM64.6%89.1%Last 3 FY26.8%81.3% MarginsLTM Op Margins17.3%-86.8%LTM Margin Change vs Last 3 FY11.1%34.4%FCF Margin14.2%-24%

(a) YoY = year-on-year (b) LTM = Last 12 months (c) FY = fiscal year

PENN Operating Income DKNG Operating Income

Financial & Market Risk

Risk MetricsPENNDKNG Financial RiskDebt as % of Equity38.5%21.7%Cash as % of Assets11.0%52.9% Market RiskMax Drawdown Last 3Y-79.1%

(a) Last 3Y = Last 3 years

Note On P/S Justification

=> Stock prices deviate from fair value for extended periods of time based on momentum, macro economy, liquidity, and other factors

=> Therefore, our P/S scenarios does not take into account fairness of current values, and we assign equal probability to all scenarios

=> However, relative assessment of P/S in context of growth, margins and risk, can shed light on likelihood of different P/S scenarios

Past Market Return Comparison vs. Benchmarks

Compare Returns With Benchmark & Trefis Portfolio

201720182019202020212022Total [1]AvgBestReturns PENN Return127%-40%36%238%-40%-27%175% DKNG Return 335%-41%-49%32% S&P 500 Return19%-6%29%16%27%-10%91% Trefis MS Portfolio Return23%-2%34%68%46%-14%237% <---Monthly Win Rates [3] PENN Win Rate83%33%67%67%33%25% 51% DKNG Win Rate 50%67%33%25% 44% S&P 500 Win Rate92%67%83%58%75%25% 67% Trefis Portfolio Win Rate100%58%75%58%83%25% 67%<---Max Drawdowns [4] PENN Max Drawdown-5%-44%-11%-82%-48%-30% -37% DKNG Max Drawdown -0%-43%-50% -31% S&P 500 Max Drawdown0%-12%-2%-31%-1%-12% -10%<---Trefis Portfolio Max Drawdown-4%-24%-11%-38%-14%-16% -18% [1] Cumulative total returns since 2017[2] Win Rate = % of calendar months in which monthly returns were positive[3] Max drawdown represents maximum peak-to-trough decline within a year

PENN Stock Return DKNG Stock Return

Compare Returns With Relevant Investment Themes That Give Similar Market & Capitalization Exposure

Penn National Gaming

DraftKings

=> Sports Stocks => Mid Cap Stocks

=> Mid Cap Stocks

FAQ

[1] Why Are We Comparing Penn National Gaming And DraftKings?

We compare stocks which share one or more similar characteristicsThis is because the decision to invest often come down to finding the best stocks within the ambit of certain characteristics that suit an investment styleWe compare Penn National Gaming vs. DraftKings because they both are sector peers; for right investment exposure to Consumer Discretionary sector, it makes sense to compare its constituents and pick the best ones

[2] How Do We Arrive At A Decision?

We favor stocks that offer meaningfully greater expected return in the next 3 yearsThese returns are calculated based on our revenue forecast and Price to Sales Ratio (P/S) scenarios consideredSimilar Price To Sales Ratio (P/S) scenarios are considered for both stocks and each scenario is weighted equally for a given stock

[3] How Do We Forecast Revenue?

We have different methodologies for companies negatively impacted by Covid, and for companies not impacted or positively impacted by CovidDifferent methodologies are essential to capture recovery in case of negative impactFor companies negatively impacted by covid, we consider quarterly revenue recovery trajectory to forecast recovery to pre-covid revenue run rate, and beyond recovery point, we apply average annual growth observed in 3 years prior to covid to simulate return to normal conditionsFor companies registering positive revenue growth during covid, we consider average annual growth prior to covid with certain weightage to growth during covid and last 12 months

[4] Can I See More Such Comparisons For Penn National Gaming And DraftKings Peers

Here are some comparisons that you may find useful for Penn National Gaming and DraftKingsPenn National Gaming vs. MGM Resorts: With Return Forecast Of 41%, Penn National Gaming Is A Better BetPenn National Gaming vs Vail Resorts: Industry Peers But Which Stock Is A Better Bet?Penn National Gaming vs MGM Resorts International: Industry Peers But Which Stock Is A Better Bet?DraftKings Inc. vs ITT Educational Services: Industry Peers; Which Stock Is A Better Bet?DraftKings Inc. vs H&R Block: Industry Peers But Which Stock To Buy? Find all such comparisons on Penn National Gaming Peer Comparisons and DraftKings Peer Comparisons

Penn National Gaming and DraftKings Insights

Penn National Gaming investment ideasPenn National Gaming counter-intuitive comparisonPenn National Gaming peer comparisonComplete analyses on Penn National Gaming (PENN) stockLatest analyses on all stocks

DraftKings investment ideasDraftKings counter-intuitive comparisonDraftKings peer comparisonComplete analyses on DraftKings (DKNG) stockLatest analyses on all stocks

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