Has Pinnacle Entertainment Reached Its Peak?

With shares of Pinnacle Entertainment (NYSE:PNK) trading at around $16.20, is Pinnacle Entertainment an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Pinnacle Entertainment has shown net losses for years. Therefore, this wouldn’t seem like an ideal time for the company to add debt, but something needed to be done. Pinnacle Entertainment recently acquired Ameristar Casinos (NASDAQ:ASCA) for $870 million. While this will make Pinnacle Entertainment a highly leveraged operation, it will also make Pinnacle Entertainment more diversified and competitive in the industry. The deal will close by the end of Q3 2013, and Pinnacle Entertainment will add eight casinos. The company will now have 17 properties in 13 areas. The big question is whether or not growth will offset debt. That is yet to be determined. We do know that S&P may cut Pinnacle Entertainment ratings because of the deal.

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Let’s take a look at what Pinnacle Entertainment brings to the table without the deal for Ameristar Casinos deal. This will give us a better idea of their current situation.