Based on Red Rock Resorts, Inc.’s (NASDAQ:RRR) recently announced earnings update on 31 December 2018, analyst forecasts appear to be pessimistic, with profits predicted to drop by -14% next year compared with the past 5-year average growth rate of 45%. Currently with a trailing-twelve-month profit of US$158m, the consensus growth rate suggests that earnings will drop to US$136m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.
Can we expect Red Rock Resorts to keep growing?
Longer term expectations from the 10 analysts covering RRR’s stock is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
By 2022, RRR’s earnings should reach US$257m, from current levels of US$158m, resulting in an annual growth rate of 11%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of $2.21 in the final year of forecast compared to the current $2.28 EPS today. In 2022, RRR’s profit margin will have expanded from 9.4% to 13%.
Future outlook is only one aspect when you’re building an investment case for a stock. For Red Rock Resorts, I’ve compiled three key aspects you should further research:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Red Rock Resorts worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Red Rock Resorts is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Red Rock Resorts? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.