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Monarch Casino & Resort Inc. Message Board

  • investora2z investora2z Nov 23, 2013 1:02 PM Flag

    Good bet

    The sell off after the earnings has led to a significant correction from the highs. The volumes were also tremendous, and the recent recovery is relatively anemic. However, the fundamentals of the company have shown consistent improvement as far as the top and the bottom line are concerned. Investors have been rewarded with good returns over the last one year, backed by consecutive quarters of growth. Zacks has downgraded the stock form outperform to neutral, but the price target of $20.30 indicates a decent upside potential from current levels. Thomson Reuters/Verus had also downgraded the stock from buy to hold recently. The EPS for full fiscal 2013 is expected to be $1.09. The correction has improved the valuations and provided an opportunity to the long term investors. There are risks because the revenue stream is not so well diversified as the company has only two main properties. However, as mentioned by an analyst on Motley, the two properties are generating cash, and are located at places where the competition is not so fierce. The absolute valuations are good, as the stock is trading at 17 times trailing earnings and 14 times forward earnings. The price to sales ratio is 1.48 and the price to book is 1.77. The company will develop its Black Hawk property which will help in revenue growth over the long term. The debt remains at reasonable levels and the cash position is good. The debt was $56 million on Sep 30, while cash was around $17.5 million. The industry is capital intensive because of the investments required for acquisition and development of properties. Inorganic growth is important for gaining access to emerging growth segments. Companies like Caesars (CZR) and MGT Capital Investments (MGT) have recently acquired companies in the fast growing social casino segment. Monarch can be a good long term bet after the correction, though one needs to choose the entry point carefully.

 
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