Accel Entertainment, Inc. (ACEL) stock intrinsic value fair value estimate & owner earnings analysis

Accel Entertainment places, services and operates video gaming terminals in bars, restaurants, convenience stores, truck stops and fraternal and veterans clubs, and shares the winnings with each location. It has been a licensed terminal operator in Illinois since 2012 and ended 2025 with 4,501 locations and 27,950 terminals across Illinois, Montana, Nevada, Louisiana, Nebraska and Georgia. It also owns Fairmount Park, a racetrack and casino in Collinsville, Illinois that it bought in December 2024; the casino opened in April 2025. 2025 revenue was $1,331.0 million, up 8.1%, and Illinois produced $963.2 million of it. What we count as earnings. We start from operating cash flow, then remove working-capital swings, subtract stock compensation as a real cost, and subtract only the part of equipment spending needed to keep the business where it is. Money paid to win and keep locations (route and customer acquisition costs, $11.9 million paid in 2025) is treated as a normal cost of doing business, not stripped out as working capital. On that basis earnings per share were $0.98 in 2021, $0.81 in 2022, $0.52 in 2023, $0.50 in 2024 and $0.69 in 2025. 2020 was a loss of $0.23 per share (operating cash flow was negative that year) and is not used. The measure ties out to net income plus depreciation and other non-cash charges within rounding in both 2024 and 2025. We anchor on the middle value of 2023 to 2025, $0.52 per share, because in 2021 and 2022 revenue jumped sharply (2021 was 132% above 2020 and 2022 was 32% above 2021), which our method treats as growth spending and so charges much less equipment cost, flattering those two years, and because 2025 was lifted by $13.3 million of deferred income taxes (book tax expense above cash taxes), a timing benefit we do not assume repeats. Earnings grew 39% per share in 2025; our base case starts at 3% a year, below that. Base case: $11.0 per share. Earnings of $0.52 per share grow 3% a year for ten years, then stay flat. Growth is credited only from what the company has shown: Illinois revenue per location per day rose 3.5% in 2025 to $894, and terminals outside Illinois grew (Nevada +346, Georgia +311, Montana +131 in 2025). We give no credit for further acquisitions, which were large and uneven ($144.0 million of cash acquisitions in 2022, $53.6 million in 2024, $5.3 million in 2025), for the new casino, for lower equipment spending (management expects $60 to $70 million of capital spending in 2026 versus $88.9 million in 2025; the first half of 2026 was $34.0 million versus $52.8 million a year earlier), or for share buybacks ($39.9 million in 2025). Beyond year ten we assume no growth: the licences and location relationships in place since 2012 keep earning, but nothing named supports more. Bear case: $4.8 per share. Earnings fall to $0.39 per share, which is what 2023 produced when all equipment spending is charged in full, and then decline 2% a year, and continue to decline at that pace after year ten. Named risks: Illinois locations fell 2.5% (2,705 versus 2,775) and Illinois terminals fell 1.0% in 2025; Nevada revenue per location per day fell 11.5%; Illinois, Georgia and Pennsylvania revenue splits are set by law and the company warns that governing bodies could reduce its share or move to negotiated splits; and the company competes with casinos, online gaming, sweepstakes and racetrack slots. Debt is also a factor: $612.0 million was borrowed at year-end 2025 under a facility maturing September 10, 2030, with a covenant capping first-lien net leverage at 4.75 times. Interest is already deducted in cash flow, so debt is reflected in the earnings level, not subtracted again. Bull case: $17.0 per share. Earnings hold at the $0.69 reached in 2025 and grow 5% a year for ten years, then stay flat. That is the pace of Illinois per-location gains (3.5% in 2025) plus continued terminal additions outside Illinois, and it assumes 2025's higher cash earnings prove repeatable with lower equipment spending. We do not credit a market recovery or new states. Margin-of-safety price: $5.5 per share, about half the base value and close to the bear value. Illinois is about 72% of revenue, its splits are set by law, and the business carries meaningful debt, so the margin of safety is wide. What could make this wrong: a cut to the Illinois statutory revenue split (the largest single exposure); sweepstakes or online gaming pulling players away; rising interest costs on floating-rate debt; 2025's earnings turning out to be the new normal (bull) or the 2023 low turning out to be normal (bear). The company amortized $25.4 million in 2025 of acquired location contracts and route costs; that is a wasting asset, which is why the base case gives no credit for growth beyond what is already visible. Contract terms with locations could not be confirmed from the filing and are not relied on.