With Macau and Singapore getting most of the gaming headlines sometimes we forget that there is indeed a large gaming business here in the U.S. One of the larger operators, with 18 casinos now under its control, is Penn National (Nasdaq: PENN), which reported earnings this week.

Revenue was up 15% in the quarter to $687.9 million, and earnings per share jumped to $0.71 from $0.09 a year ago. Earnings were affected negatively by Hollywood Casino Tunica closing because of flooding and by a positive impact from the addition of M Resort to the portfolio in June.

At M Resort in Las Vegas, which I think was a great investment at $230.5 million, property EBITDA was $2.1 million for the month of June. This wasn't a big impact on the quarter, but if we just multiply that by 12 months, we see that $25.2 million in EBITDA is the run rate we saw this month. With improvement in operations and a currently slow locals market, that number should improve significantly.

Competing in an increasingly competitive U.S. market, Penn National looks much stronger than Ameristar Casinos (Nasdaq: ASCA), Boyd Gaming (NYSE: BYD), or Pinnacle Entertainment (NYSE: PNK), which are all struggling to make a profit. A savvy investment in M Resort and increasing volume as the economy recovers should help distinguish Penn as the best investment in the group.

The hidden gem of gaming
We might overlook smaller-market casinos, but Penn National has actually outperformed Las Vegas Sands (NYSE: LVS) on the stock market this year. It isn't as sexy as Las Vegas Sands or other companies with casinos in Asia, but Penn National is still a solid stock in the gaming space. The company has beaten earnings estimates the last five quarters, and shares trade at less than 25 times 2011 earnings.

For a local gaming play, Penn National is as good a bet as any.

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