On Thursday, Penn National Gaming (Nasdaq: PENN) reported earnings that trounced expectations, indicating small-market gaming is back on track. Revenue was up just 2.8% to $638.3 million, but more importantly, net income jumped 125.7% to $48.3 million, or $0.46 per share.

The full-year earnings forecast was increased to $1.15 per share from $0.98 per share, always a welcome site for investors.

On the development front, the company broke ground on Hollywood Casino Toledo in August and opened a casino in Maryland late in the quarter. The Maryland casino only contributed four days to the quarter but is "performing up to expectations," according to management.

Moving to Las Vegas
Two weeks ago, we applauded the purchase of M Resort's debt that presumably will be turned into equity. The company wouldn't give too much detail on plans for the resort until a restructuring is officially announced, but they did give us a sneak peak. M Resort had revenue year to date through August of $106.5 million and EBITDA of $9.7 million, not exactly incredible numbers, but it provides a lot of upside potential on a $230.5 million purchase price. Don't expect more deals like this, though; the property isn't viewed as a long-term move into Las Vegas, just an opportunity to purchase a valuable property at a good price.

The casino is relatively close to The Strip (although not walking distance), but Penn isn't going to become the next Strip operator competing with behemoths MGM Resorts (NYSE: MGM) and Harrah's. M Resort is a locals casino that will benefit from Penn's database of customers nationwide looking for a high quality Las Vegas destination.

Entering the Las Vegas locals market isn't a slam dunk give the entrenched competition. Boyd Gaming (NYSE: BYD) and Stations Casinos both have healthy footprints in the market, but I'm giving M Resort better than a punchers chance with Penn's help.

Gaming is back
The outstanding results at Penn and a strong balance sheet put Penn in great position moving forward. A price/earnings ratio near 30 is reasonable considering that newly built/purchased developments have yet to contribute to earnings.

Results at Penn bode well for smaller gaming operators with diverse operations throughout the country. We will see if that continues when Motley Fool Hidden Gems pick Ameristar Casinos (Nasdaq: ASCA) reports results early in November.

Interested in reading more about Penn National Gaming? Click here to add it to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.

More on Gaming: