In 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
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