Should you buy Penn National Gaming (NASDAQ:PENN) stock? After panic selling amid the novel coronavirus outbreak, investors are now more confident in the casino operator's future prospects. But, don't assume the company is out of the woods just yet. Like other industries affected by the pandemic, it could a long time before things, including PENN stock, "return to normal."Source: Casimiro PT / Shutterstock.com In today's market, casino stocks offer high risk, but high potential returns. Yet, Penn National may not be your best option. Firstly, the company mostly leases the real estate under its casinos. This may have been a smart financial engineering move. But it leaves them fewer liquidity options if "social distancing" shutdowns continue to keep their casinos closed.Secondly, shares are richly priced compared to MGM Resorts (NYSE:MGM), Las Vegas Sands (NYSE:LVS), and Wynn Resorts (NASDAQ:WYNN). These could be better ways to play a potential industry rebound, as might VanEck Vectors Gaming ETF (NASDAQ:BJK), which holds all four names in its 42-stock exchange-traded fund portfolio.InvestorPlace - Stock Market News, Stock Advice & Trading TipsAlso, who knows if the gaming industry will fully recover once the pandemic fades? Given the high-fixed costs of the gaming industry, even a 20% decline in revenue could mean bad news. Especially for weaker names like Penn National.Considering these factors, other casino stocks may offer better opportunity. Let's dive in, and see why PENN stock isn't your "best bet." Surviving CoronavirusCan Penn National survive the coronavirus? When the pandemic first hit America, Wall Street's answer was a resounding "no" as shares fell from above $39 in February to as low as $3.75 in March. Yet, with the $2 trillion stimulus package bolstering confidence in hard-hit industries, shares have rebounded more than four-fold, closing at $15.06 per share on April 14. * 7 Bank Stocks to Watch as Earnings Season Heats Up Will shares continue to climb? That depends. Until we know when casinos are going to re-open, handicapping this stock remains a game of "predicting the unpredictable."But, there's another big risk specific to PENN stock. Most of the company's property is leased, not owned. In fact, the company was a pioneer in the casino REIT (real estate investment trust) trend.In 2013, the company spun off most of its real estate as the first casino REIT, Gaming and Leisure Properties (NASDAQ:GLPI). This transaction allowed them to realize the underlying value of its property. But while this boosted valuation, it left them exposed to heavy lease liabilities.As our own Matt McCall wrote on April 3, Penn National carries $8.5 billion in lease liabilities on its balance sheet. In 2020 alone, the company must make $900 million in lease payments. This wouldn't be a problem if their casinos were generating cash flow. But how about now, when its casinos are sitting idle?Yet, the stock's current valuation doesn't reflect this weakness. In fact, shares now trade at a slight premium to higher-quality rivals. Richly Priced Relative To RiskThe recent rally in PENN Stock has made shares richly priced. The company's enterprise value/EBITDA (EV/EBITDA) ratio now stands at 10.8. That's higher than the EBITDA multiples of stronger players like Las Vegas Sands, MGM, and Wynn. Yes, perhaps this regional-focused operator could be more resilient than these Vegas-centric rivals. But, the company is on shakier ground financially.According to Instinet's Harry Curtis, Las Vegas Sands and Wynn had the most liquidity in the space (more than 500 days). In other words, they could stay closed for over a year, and still stay solvent. According to the analyst, MGM is also has strong liquidity.On the other hand, Penn National has less of a cushion. According to Curtis, Penn may only be able to ride things out for two or three quarters, maximum. With its greater vulnerability, why should shares enjoy a higher valuation? * 9 Robust Stocks to Buy to Survive a Bear Market However, because most of Penn's liabilities are leases with GLPI, the company could see some rent relief. The spun-off REIT entity has already helped out its former parent, agreeing to buy several properties in exchange for $337.5 million in rent credits. PENN Stock is Not Your "Best Bet"Things may not be so bad for Penn National. The recent surge in its share price reflects this. Yet, that doesn't mean shares are a screaming buy at today's prices.As I highlighted earlier this month, other opportunities could offer a better risk/return proposition. PENN stock? Not so much. In short, this isn't your "best bet" on a casino industry rebound.Thomas Niel, contributor to InvestorPlace, has written single-stock analysis for web-based publications since 2016. As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities. More From InvestorPlace * America's 1 Stock Picker Reveals Next 1,000% Winner * 25 Stocks You Should Sell Immediately * 1 Under-the-Radar 5G Stock to Buy Now * The 1 Stock All Retirees Must Own The post Even as Penn National Gaming Stock Rebounds, Consider Other Casino Plays appeared first on InvestorPlace.
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