In This Article:
- By GF Value
The stock of MGM Resorts International (NYSE:MGM, 30-year Financials) is estimated to be significantly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $38.91 per share and the market cap of $19.1 billion, MGM Resorts International stock is believed to be significantly overvalued. GF Value for MGM Resorts International is shown in the chart below.
Because MGM Resorts International is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which is estimated to grow 2.16% annually over the next three to five years.
Link: These companies may deliever higher future returns at reduced risk.
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. MGM Resorts International has a cash-to-debt ratio of 0.29, which which ranks better than 100% of the companies in Market Overview industry. The overall financial strength of MGM Resorts International is 3 out of 10, which indicates that the financial strength of MGM Resorts International is poor. This is the debt and cash of MGM Resorts International over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. MGM Resorts International has been profitable 5 over the past 10 years. Over the past twelve months, the company had a revenue of $4.6 billion and loss of $4.36 a share. Its operating margin is -45.14%, which ranks better than 100% of the companies in Market Overview industry. Overall, GuruFocus ranks the profitability of MGM Resorts International at 4 out of 10, which indicates poor profitability. This is the revenue and net income of MGM Resorts International over the past years: