Is Paddy Power Betfair in freefall?

There's further doom and gloom at Paddy Power Betfair Tuesday, just 24 hours after the highly-regarded bookie flagged the loss of its equally well-respected chief executive.

Picking Peter Jackson as CEO is a brave move when you're losing someone of Breon Corcoran's pedigree. He's only held the hot seat at FTSE 100-listed Worldpay's UK division since March, and Paddy Power Betfair needs strong leadership now more than ever.

With wider industry issues at play here, and having lost a third of its value since the Irish bookmaker merged with the online gambling site 18 months ago, the market is yet to be convinced it's the right move.

Indeed, UBS analyst Chris Stevens says keep selling down to £69, implying a further 5% correction.

Announcing CEO succession plans and a slug of your latest figures the day before interim numbers took away all the fun of results day.

However, no one predicted an earth-shattering performance given fierce competition and tough comparisons with last year, when the Euro football tournament generated millions for bookies.

Revenue growth of 9% to £827 million and 21% increase in underlying cash profit to £220 million was largely in line with expectations, but a miss at the online business easily offset better results in the smaller Australian operation.

A 6% increase in profit at the online division to £148 million was way off the £173 million pencilled in by Stevens. The £54 million made by Australia - £15 million more than UBS expected - couldn't plug the gap.

And there are wider problems for Paddy Power Betfair and the sector.

It's a highly-regarded operator, and the valuation reflects that. But even it can't avoid the clutches of the regulator, both here and also in Australia.

Away from the results, it's highly likely the government's triennial review, expected to report in November, will damage profits at the high street business, especially in the albeit unlikely event it limits stakes on fixed-odds betting terminals at just £2. A further tax hit in Australia would also have a significant impact.

Given short-term pressure on business and with regulatory uncertainty a potential banana skin, picking up Paddy Power Betfair shares, even at these bombed-out prices, is high-risk.

They still trade on a forward price/earnings (PE) ratio of 19 and enterprise value/cash profit ratio of 13.7. That's not cheap. Ladbrokes Coral trades on 10.4 and 7.6 times, respectively, and William Hill on 11.9 and 8.5 times.

Look further out, however, and this quality operator should stand out. It's also widely tipped to be a player in any further industry consolidation once regulatory issues are put to bed.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.