If you've watched any sports in the last few years, you have undoubtedly seen the relentless advertising from various sportsbooks offering an array of sign-up deals.
With numerous research firms expecting the global sports betting market to grow at a double-digit rate annually through 2030 and beyond, this high spending on ads makes perfect sense.
However, it is expensive for these sportsbooks to not only place these ads but also "give away" free money up front to encourage bettors to join their platform instead of another. Long story short, it is a fiercely competitive space, and profit margins are thin (if there are any at all).
Rather than trying to divine who will be the long-term winner among these sportsbooks -- and hoping they mature into profitable enterprises with time -- there may be a more straightforward way to gain exposure to the sports betting industry.
Meet Sportradar (SRAD 2.52%). Its technology platform provides mission-critical data and betting services to sportsbooks while also acting as a go-between for sports leagues looking to get their content out to media partners. Through these offerings, Sportsradar acts as a pick-and-shovel play to the broader sports betting industry, making it a potentially less risky proposition than the sportsbooks themselves.
Best yet for investors? Sportradar just received $225 million to acquire a sports betting company.
Yes, you read that right. Here's why the deal happened and how it makes Sportradar an unstoppable-looking growth stock to buy today.
Sportradar adds to its leadership position -- and its cash balance
Connected to more than 800 betting operators, 900 media companies, and 400 sports leagues, teams, and federations, Sportradar is the leading sports data and content solutions platform globally. Enabling betting across 85 types of sports, the company covered over 1 million matches and processed 87 billion bets in 2024.
Whether providing live odds and data for sportsbooks, analytics and audiovisual for broadcasters, or deeper fan engagement and integrity services for sports leagues, Sportradar is the engine that powers global sports betting.
Boasting sports rights deals with the vast majority of sports leagues (outside of the NFL, due to its exorbitant price tag), the company added to its content library by acquiring data platform IMG Arena from Endeavor.
However, this wasn't your average acquisition.
NASDAQ: SRAD
Key Data Points
Rather than paying to pick up IMG Arena, Sportradar received $125 million in cash and $100 million in pre-payments to IMG's partners for their sports rights.
The reason for this fire sale stems from IMG Arena's parent company, Endeavor, recently being acquired by private equity firm Silver Lake. Primarily focused on technology investing, Silver Lake wasn't interested in IMG Arena's sports content and wanted to buy a "streamlined" version of Endeavor, which is also the majority owner of TKO Group Holdings.
The sale of IMG could also be an admission from Endeavor that it spent way too much on these sports rights, and this is the simplest way to offload them as it integrates into Silver Lake.
However, as the saying goes, "One man's trash is another man's treasure." And that sure seems to be the case for Endeavor and Sportradar.
While Endeavor may not have had the scale to effectively monetize IMG Arena's sports rights -- which include the PGA Tour, the UFC, MLS, three tennis majors, and 30,000 streaming events -- Sportradar does.
Leveraging its existing relationships, the company can now offer these events to both its betting and media partners, adding even more value to their partnership.
Management believes the deal would immediately be accretive to Sportradar's adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margins if the deal closes in the fourth quarter of 2025 as expected. Currently guiding for revenue growth of 15% in 2025, management said closing the IMG Arena deal would boost this outlook closer to the upper 20% range.
Boosting adjusted EBITDA, nearly doubling revenue growth, and beefing up its sports content library -- all while receiving $225 million -- this deal seems like a winning bet for investors.
Image source: Getty Images.
Sportradar's booming profitability and cash generation
As Sportradar continues to scale and generate more revenue per client, its profitability and cash generation steadily improved.
SRAD Operating Margin and Owners' Cash Profits Margin (TTM) data by YCharts
With the company's top 200 clients maintaining an excellent net revenue retention rate of 127%, it is clear that once customers are in Sportradar's ecosystem, they find value in buying additional services.
In addition to these figures, Sportradar's cash return on invested capital (ROIC) has also been rising lately.
SRAD Cash Return on Capital Invested (CROCI) (TTM) data by YCharts
This rising cash ROIC is critical for Sportradar and potential investors as it shows management's ability to buy new sports rights at a fair price and effectively monetize them. Since this cash ROIC shows the company is able to generate outsized cash flows from its debt and equity, it could be a promising sign of things to come with the IMG Arena acquisition.
While Sportradar doesn't look "classically cheap" with a price-to-free-cash-flow (P/FCF) ratio of 52, its leadership advantage, growth potential, and improving margins could help it quickly outgrow this valuation.
