MGM Resorts International (NYSE:MGM) saw significant share price volatility over the past couple of months on the NYSE, rising to the highs of $29.6 and falling to the lows of $24.21. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether MGM Resorts International’s current trading price of $26.58 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at MGM Resorts International’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is MGM Resorts International still cheap?
According to my valuation model, MGM Resorts International seems to be fairly priced at around 13% below my intrinsic value, which means if you buy MGM Resorts International today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $30.62, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since MGM Resorts International’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.
Can we expect growth from MGM Resorts International?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for MGM Resorts International, at least in the near future.
What this means for you:
Are you a shareholder? MGM seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on MGM for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on MGM should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on MGM Resorts International. You can find everything you need to know about MGM Resorts International in the latest infographic research report. If you are no longer interested in MGM Resorts International, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.