How is the capitalization of gambling companies estimated

Introduction: why gambling is a special case

Capitalization (market value of equity) in iGaming is rarely equal to the "average market formula." The price is influenced not only by growth rates and margins, but also by regulatory risks, the quality of licenses, the share of gray GEOs, the sustainability of payments, responsibility to players (RG), as well as the structure of brands and the technical stack. Therefore, the assessment is based on three blocks: product economics → risk profile → liquidity and capital structure.

Basic assessment approaches

1) Market multiples (Comparables)

Used for quick benchmark and DCF adequacy check.

EV/EBITDA: the main multiplier for operators and B2B-SaaS with positive profits.

EV/Revenue: Appropriate for fast growing B2B/content studios or assets with "investable" margins.

P/E: secondary for the sector (accounting for depreciation, interest and tax may distort).

Rule-of-40 (for B2B-SaaS): Growth% + EBITDA margin% ≥ 40 - "revenue quality" indicator.

What we correct in the multiplier:

Share of revenue from "white" licensed markets (premium).
Concentration of payment routes/PSP (discount when depending on 1-2 providers).
RG/AML profile (penalty risks → discount).
Availability of own IP/engines, data and distribution channels (premium).

2) DCF (Discounted Cash Flow)

Classic free cash flow (FCF) and WACC model extended to sector features:

Different growth/margin rates for verticals (sports, casinos, live, lotteries) and geographies.
Regulatory scenarios (basic/stress): GGR/NGR taxes, marketing restrictions, KYC severity.
Capital requirements: licenses, RNG certification, live studios, ISO/PCI implementations.
Working capital: clearing with PSP, player deposits (segregated accounts), jackpots/progressives (reserves).

3) SOTP

Relevant for holdings with multiple business lines (operator + studio + affiliate media + payments). Each part is valued by its "own" multiplier/DCF, after which it is added and adjusted for synergies/central costs.

Revenue bases: GGR, NGR, Net Gaming Revenue

GGR (Gross Gaming Revenue) = Bets - Wins.

NGR (Net Gaming Revenue) = GGR − bonuses − jackpot contributions − platform/provider commissions.

Net Revenue/NNR (B2B) - supplier's revenue after revs/discounts.

Important: multipliers are better compared on NGR/NNR (and not GGR), because they reflect "pure" monetization.

EV and Equity: what to include and subtract

Enterprise Value (EV) ≈ Market Cap + Net Debt ± Minority Interest + Lease liabilities (IFRS 16) + convertibles (если в деньгах) − Non-operating cash.

Market Cap = Share price × Free float & total shares (including options/SBC and dual stock class).

Check:

Convertible loans/SAFE → dilution.
Earn-out M&A → contingencies.
Game reserves (jackpots) and client deposits are not debt, but affect liquidity.

Premium/discount factors to multiples

Regulatory and Licensing

White licenses (UKGC/MGA/EL/WLA, etc.) → premium to EV/EBITDA.

Gray/unsettled GEOs → PSP risk discount for locks, penalties and off-boarding.

The frequency and transparency of reporting to regulators → reduces the discount rate.

Payments and anti-fraud

Approval rate/Cashout T-time/Chargeback rate → revenue quality proxy.

The presence of PSP/APM orchestration and backup routes → a premium for sustainability.

Responsible play and KYC/AML

Proactive RG (triggers, XAI, SoF processes) → lower risk premium.

History of fines/investigations → discount.

Brand portfolio and distribution channels

Multi-brand and its own organics/affiliates/streaming → less dependence on paid advertising.

The share of revenue from top clients/top aggregators (concentration) → a risk discount.

Technology and data

Proprietary engines, data/BI/CDP, real-time marketing, NRR> 110-120% (for B2B) → premium.

Monolith/legacy without roadmap → discount.

Operators vs B2B providers: different valuation profiles

Operators (B2C):

The multiplier is anchored by EV/EBITDA, sensitive to GGR/NGR taxes and marketing limits.
KPI: FTD, ARPPU, retention, live share, bonus bonus, approval rate, NGR margin.
Regional diversification = lower multiplier volatility.

B2B (platforms, content, payments, KYC):

Look at Rule-of-40, NRR, churn, gross margin.
EV/Revenue is applicable for high growth and "investable" margins; at maturity - transition to EV/EBITDA.
Content studios - premium for IP and hit-rate; payments - discount/risk premium.

Mini-formulas and landmarks

EV/EBITDA adjusted = (EV/ EBITDA_adj), where EBITDA_adj = EBITDA GAAP/IFRS + normalizations (one-time fines, M&A expenses, reorganizations), but without the "cosmetics" of permanent shares.

WACC = K_e × (E/V) + K_d × (D/V) × (1 − Tax) where K_e includes country/regulatory risk.

Rule-of-40 = Growth % + EBITDA margin %.

Revenue quality (proxy): NRR,% white GEO, approval rate, RG incidents/fines.

Example 1: Multi-GEO operator (simplified)

NGR: $500 million, EBITDA margin: 22% → EBITDA $110 million

White markets: 70% NGR, gray: 30% (discount 10-20% to multiplier).

Net debt: $150 million; EV/EBITDA benchmark: 7. 0×; apply discount of 15% → 6. 0×.

EV ≈ $660 million; Equity Value ≈ EV − Net Debt = $510 млн.

Add. adjustments: minority shareholders/IFRS16/earn-out → ±.

Example 2: B2B platform (growth)

Revenue: $80 million (+ 45% YoY), GM 78%, EBITDA 12%, NRR 122%.

Rule-of-40 = 45 + 12 = 57 → premium to EV/Revenue.

EV/Revenue peer: 4. 5×; premium for NRR and white GEO → 5. 0×.

EV ≈ $400 million; with Net Debt ≈ 0 → Equity ≈ $400 million.

When moving to maturity - rotation on EV/EBITDA.

IPO/publicity: liquidity and free float structure

Even an "ideal" economy can trade at a discount due to low liquidity, dual stock class, narrow free float, frequent SPOs. IR practices (transparent metrics, SLAs, post-mortems) reduce the risk premium and support the multiplier.

Common estimation errors

1. Comparison by GGR rather than NGR/NNR.

2. Ignoring payment risk (approval/chargeback/off-boarding).

3. Underestimation of RG/AML fines and regulatory scenarios.

4. Gluing of the "global" multiplier without separate vertical evaluation/GEO.

5. Unaccounted IFRS 16, convertible, earn-out, minority shareholders.

6. Reassessment of marketing effect without incrementality (uplift tests!).

Analyst checklist (short)

Business structure

Vertical map (sports/casino/live/lotteries) and GEO; shares in NGR.
Brand portfolio, traffic channels, organic/affiliate share.

Finance and revenue quality

NGR/NNR, unit-economy, Rule-of-40/NRR/churn (for B2B).
EBITDA normalization, jackpot reserves, working capital.

Risk and compliance

Licenses and reporting, history of fines, RG/SoF processes.
Payment card: PSP/APM, approval, cashout time, backup routes.

Capital and disclosure

Debt structure/convertibles/options/SBC, IFRS16.
IR practices: transparent metrics, SLA dashboards, post-mortems.

Assessing the capitalization of gambling companies is not "one multiplier for all." It relies on net monetization (NGR/NNR), revenue quality (NRR, churn, RG/AML, payments), regulatory map and capital structure. By combining the right comps, scenario DCF and SOTP for holdings, you get a realistic value range and avoid the main pitfalls of the sector.