Since February 2025, Accel Entertainment has been in a holding pattern, posting a small loss of 3.8% while floating around $11.29. The stock also fell short of the S&P 500’s 5.4% gain during that period.
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Why Is Accel Entertainment Not Exciting?
We're cautious about Accel Entertainment. Here are three reasons why ACEL doesn't excite us and a stock we'd rather own.
1. Weak Growth in Video Gaming Terminals Sold Points to Soft Demand
Revenue growth can be broken down into changes in price and volume (for companies like Accel Entertainment, our preferred volume metric is video gaming terminals sold). While both are important, the latter is the most critical to analyze because prices have a ceiling.
Accel Entertainment’s video gaming terminals sold came in at 27,388 in the latest quarter, and over the last two years, averaged 6.4% year-on-year growth. This performance was underwhelming and suggests it might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability. 
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Accel Entertainment’s revenue to rise by 6.4%, close to its 31.1% annualized growth for the past five years. This projection is underwhelming and implies its newer products and services will not lead to better top-line performance yet.
3. Mediocre Free Cash Flow Margin Limits Reinvestment Potential
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Accel Entertainment has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.8%, lousy for a consumer discretionary business.
Final Judgment
Accel Entertainment’s business quality ultimately falls short of our standards. With its shares trailing the market in recent months, the stock trades at 11.6× forward P/E (or $11.29 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.
Stocks We Would Buy Instead of Accel Entertainment
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