Unveiling Studio City International Holdings (MSC)'s Value: Is It Really Priced Right? A ...
Studio City International Holdings Ltd (NYSE:MSC) has been making waves in the stock market with a daily gain of 5.59% and a 3-month gain of 12.95%. Despite its Loss Per Share of 1.4, the question remains: is the stock modestly undervalued? This comprehensive analysis aims to answer that question and provide an in-depth look at the company's valuation. Read on to discover more about Studio City International Holdings Ltd (NYSE:MSC).
Company Introduction
Studio City International Holdings Ltd is a world-class gaming, retail, and entertainment resort located in Cotai, Macau. It operates Studio City Casino with around 250 mass-market gaming tables; approximately 970 gaming machines; and 45 VIP rolling chip tables. The company also offers non-gaming attractions, including a figure-8 Ferris wheel, a Warner Bros-themed family entertainment center, a 4-D Batman flight simulator, an exclusive night club, and a live performance arena. The majority of its revenue is derived from the Macau region. With a stock price of $7.55 and a GF Value of $7.99, the company appears to be modestly undervalued.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
At its current price of $7.55 per share, Studio City International Holdings has a market cap of $1.60 billion and appears to be modestly undervalued. As a result, the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, investors must carefully review a company's financial strength before deciding whether to buy shares. Studio City International Holdings has a cash-to-debt ratio of 0.16, which ranks worse than 71.46% of 827 companies in the Travel & Leisure industry. Based on this, GuruFocus ranks Studio City International Holdings's financial strength as 2 out of 10, suggesting a poor balance sheet.
Profitability and Growth
Investing in profitable companies is less risky, especially those with consistent profitability over the long term. Studio City International Holdings has been profitable 1 over the past 10 years. Over the past twelve months, the company had a revenue of $168.20 million and a Loss Per Share of $1.4. Its operating margin is -111.9%, which ranks worse than 95.73% of 820 companies in the Travel & Leisure industry. Overall, the profitability of Studio City International Holdings is ranked 3 out of 10, indicating poor profitability.
One of the most important factors in the valuation of a company is growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Studio City International Holdings is -82.1%, which ranks worse than 99.74% of 766 companies in the Travel & Leisure industry. The 3-year average EBITDA growth is 0%, which ranks worse than 0% of 608 companies in the Travel & Leisure industry.
Return on Invested Capital vs. Weighted Average Cost of Capital
Comparing a company's return on invested capital (ROIC) and its weighted average cost of capital (WACC) is another way to assess its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. Ideally, the ROIC should be higher than the WACC. For the past 12 months, Studio City International Holdings's ROIC is -6.27, and its cost of capital is 2.66.
Conclusion
In conclusion, the stock of Studio City International Holdings (NYSE:MSC) shows every sign of being modestly undervalued. However, the company's financial condition is poor, and its profitability is also poor. Its growth ranks worse than 0% of 608 companies in the Travel & Leisure industry. To learn more about Studio City International Holdings stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
