Wynn Resorts Ltd (NASDAQ:WYNN) experienced a daily loss of 4.15%, with a 3-month loss of -2.73%. Despite these losses, the company's Loss Per Share was recorded at 0.16. This raises the question: is Wynn Resorts (NASDAQ:WYNN) modestly undervalued? This article aims to provide a comprehensive valuation analysis to answer this question. Read on for a deep dive into the financials of Wynn Resorts.
Founded in 2002 by Steve Wynn, Wynn Resorts Ltd (NASDAQ:WYNN) operates luxury casinos and resorts across the globe. With four megaresorts in Macau and Las Vegas and a digital sports betting and iGaming platform, Wynn Resorts is a significant player in the hospitality industry. The company's stock price currently stands at $97.42, with a market cap of $11.10 billion. However, the fair value (GF Value) of the company is estimated at $136.48, suggesting that the stock is modestly undervalued.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, calculated considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. 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.
Wynn Resorts (NASDAQ:WYNN) is believed to be modestly undervalued based on the GF Value calculation. With its current price of $97.42 per share, and a market cap of $11.10 billion, the long-term return of its stock is likely to be higher than its business growth due to its relative undervaluation.
It is essential to assess a company's financial strength before investing. Companies with poor financial strength pose a higher risk of permanent loss. Wynn Resorts has a cash-to-debt ratio of 0.29, worse than 60.65% of 826 companies in the Travel & Leisure industry. This indicates that the financial strength of Wynn Resorts is poor.
Profitability and Growth
Profitable companies, especially those with consistent profitability over the long term, are typically safer investments. Wynn Resorts has been profitable 7 out of the past 10 years. With an operating margin of 6.98%, it ranks better than 52.56% of 820 companies in the Travel & Leisure industry. However, the average annual revenue growth of Wynn Resorts is -18.8%, which ranks worse than 78.56% of 765 companies in the industry.
Another method of determining the profitability of a company is to compare its return on invested capital (ROIC) to the weighted average cost of capital (WACC). For the past 12 months, Wynn Resorts's ROIC is 3.71, and its WACC is 8.86.
In conclusion, Wynn Resorts (NASDAQ:WYNN) is believed to be modestly undervalued. The company's financial condition is poor, and its profitability is fair. Its growth ranks worse than 83.83% of 606 companies in the Travel & Leisure industry. To learn more about Wynn Resorts stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.