Monarch Casino & Resort (MCRI): Checking Valuation After Strong Year-to-Date Gains and Recent Momentum Cooldown

Monarch Casino & Resort (MCRI) has quietly outperformed many peers this year, with the stock up about 23% year to date and roughly 12% over the past year, despite recent pullbacks.

See our latest analysis for Monarch Casino & Resort.

That recent dip in the 90 day share price return contrasts with a strong year to date share price gain and a solid one year total shareholder return. This suggests momentum has cooled slightly rather than reversed.

If Monarch’s steady performance has you thinking about where else consistent compounding might be hiding, now is a good time to explore fast growing stocks with high insider ownership.

With shares still trading at a notable discount to analyst targets despite steady revenue and profit growth, the key question now is whether Monarch Casino & Resort remains undervalued or if the market is already pricing in its future expansion?

Price to Earnings of 21.2x: Is it justified?

On a price to earnings basis, Monarch Casino & Resort trades at 21.2 times earnings, with the latest close at $96 and the stock screens as good value versus several benchmarks.

The price to earnings ratio compares what investors pay for each dollar of the company’s current earnings, a key lens for mature, profitable hospitality operators like Monarch.

Here, the market is paying 21.2x earnings, a touch below the peer average of 25.6x and fractionally under the broader US hospitality industry average of 21.3x. This suggests investors are not assigning a speculative premium given the reported five year earnings growth of 14% per year and forecasts for profits to continue growing around the high single digits.

Set against Simply Wall St’s estimated fair price to earnings ratio of 16.2x, however, the current 21.2x looks demanding. This implies the market could eventually gravitate toward a lower multiple if growth underwhelms or sector sentiment cools.

Explore the SWS fair ratio for Monarch Casino & Resort

Result: Price-to-Earnings of 21.2x (ABOUT RIGHT)

However, persistent multiple compression, if earnings growth slows or regional gaming demand softens, could quickly erode today’s apparent valuation support.

Find out about the key risks to this Monarch Casino & Resort narrative.

Another View, Using Our DCF Model

While the current price to earnings ratio looks roughly in line with peers, our DCF model presents a different perspective. It suggests Monarch Casino & Resort is trading at about a 40.8% discount to its estimated fair value of around $162 per share, which indicates the market may be underestimating its long term cash generation potential.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Monarch Casino & Resort for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 909 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Monarch Casino & Resort Narrative

And if you would rather follow your own process than rely on this view, you can quickly build a personalised thesis in just a few minutes: Do it your way.

A great starting point for your Monarch Casino & Resort research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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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.