Casino Stocks Not Faring Well in My Models
Posted on Tuesday, May 13th, 2008 | In Current Market News, Stocks to WatchIn March I was bearish on casino operator MGM Mirage (MGM), saying “At an enterprise value of 3.8 times 2007 revenue and 21 times 2007 income from continuing operations, MGM looks about as fully valued as one can imagine. The acquisition of Harrah’s, which recently closed after a year-long process, valued that company at 2.6 times 2007 revenue, and 17 times 2007 operating income. And that deal was launched at the height of the private equity boom. It seems wishful thinking to expect a similar valuation in today’s environment.”
Since then, MGM is down 20% and the S&P 500 is up 5%. Meanwhile, casino operators are not scoring highly in the models I follow. I don’t really have time to analyze any of them deeply, but thought it would be worthwhile to point out a couple of the notable model results.
Ameristar Casino (ASCA)
- Earnings momentum: Negative
- Earnings quality: Negative
- Price Momentum: Negative
- Free cash flow: Negative
- Return potential: Neutral
Pinnacle Entertainment (PNK)
- Earnings momentum: Negative
- Earnings quality: Negative
- Price Momentum: Negative
- Free cash flow: Negative
- Return potential: Neutral
Disclosure: At time of publication, William Trent has no financial position in the companies mentioned in this article.
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 About William A. Trent (http://stockmarketbeat.com)
Stock Market Beat editor William A. Trent, CFA, has been an equity analyst since 1996 and is co-author of Understanding and Evaluating Prospectuses, Offering Documents, and Proxy Statements. His experience includes stints with institutional investors responsible for more than $70 billion in assets and covers all market-cap sizes. Sector concentrations have been within the TMT (Telecom, Media and Technology) and Transportation sectors. He is also the senior editor of Financial Education. He is available for freelance writing and consulting projects and can be contacted here. |
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