When Should You Buy Monarch Casino & Resort, Inc. (NASDAQ:MCRI)?
Monarch Casino & Resort, Inc. (NASDAQ:MCRI), is not the largest company out there, but it saw a decent share price growth in the teens level on the NASDAQGS over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Monarch Casino & Resort’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Monarch Casino & Resort
What's the opportunity in Monarch Casino & Resort?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Monarch Casino & Resort’s ratio of 22.99x is trading slightly below its industry peers’ ratio of 24.84x, which means if you buy Monarch Casino & Resort today, you’d be paying a reasonable price for it. And if you believe that Monarch Casino & Resort should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since Monarch Casino & Resort’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Monarch Casino & Resort look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Monarch Casino & Resort's earnings over the next few years are expected to increase by 63%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in MCRI’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at MCRI? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye on MCRI, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for MCRI, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you want to dive deeper into Monarch Casino & Resort, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 2 warning signs for Monarch Casino & Resort and you'll want to know about these.
If you are no longer interested in Monarch Casino & Resort, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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