Intrinsic value of Monarch Casino&Resort - MCRI

Previous Close

$42.24

  Intrinsic Value

$33.25

stock screener

  Rating & Target

sell

-21%

Previous close

$42.24

 
Intrinsic value

$33.25

 
Up/down potential

-21%

 
Rating

sell

We calculate the intrinsic value of MCRI stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  7.43
  10.50
  9.95
  9.45
  9.01
  8.61
  8.25
  7.92
  7.63
  7.37
  7.13
  6.92
  6.73
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.36
  5.32
  5.29
  5.26
Revenue, $m
  217
  240
  264
  289
  315
  342
  370
  399
  430
  461
  494
  528
  564
  601
  639
  679
  721
  764
  810
  857
  906
  957
  1,011
  1,067
  1,125
  1,187
  1,251
  1,318
  1,388
  1,461
  1,538
Variable operating expenses, $m
 
  128
  141
  154
  167
  181
  196
  211
  227
  244
  261
  277
  295
  315
  335
  356
  377
  400
  424
  448
  474
  501
  529
  558
  589
  621
  655
  690
  726
  765
  805
Fixed operating expenses, $m
 
  66
  67
  69
  71
  72
  74
  76
  78
  80
  82
  84
  86
  88
  90
  93
  95
  97
  100
  102
  105
  107
  110
  113
  116
  119
  122
  125
  128
  131
  134
Total operating expenses, $m
  178
  194
  208
  223
  238
  253
  270
  287
  305
  324
  343
  361
  381
  403
  425
  449
  472
  497
  524
  550
  579
  608
  639
  671
  705
  740
  777
  815
  854
  896
  939
Operating income, $m
  39
  46
  56
  66
  77
  88
  100
  112
  124
  137
  151
  168
  183
  198
  214
  231
  249
  267
  286
  306
  327
  349
  372
  395
  421
  447
  474
  503
  533
  565
  599
EBITDA, $m
  54
  64
  75
  86
  99
  112
  125
  139
  153
  168
  184
  201
  218
  235
  254
  273
  293
  314
  336
  359
  383
  408
  434
  462
  490
  520
  552
  585
  620
  656
  694
Interest expense (income), $m
  0
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
Earnings before tax, $m
  38
  45
  55
  65
  75
  86
  97
  109
  122
  134
  148
  164
  179
  194
  209
  226
  243
  261
  280
  299
  320
  341
  363
  387
  411
  437
  464
  492
  522
  553
  585
Tax expense, $m
  13
  12
  15
  17
  20
  23
  26
  29
  33
  36
  40
  44
  48
  52
  57
  61
  66
  70
  75
  81
  86
  92
  98
  104
  111
  118
  125
  133
  141
  149
  158
Net income, $m
  25
  33
  40
  47
  55
  63
  71
  80
  89
  98
  108
  120
  130
  141
  153
  165
  177
  190
  204
  218
  233
  249
  265
  282
  300
  319
  339
  359
  381
  404
  427

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  26
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  295
  297
  327
  358
  390
  423
  458
  495
  532
  572
  612
  655
  699
  744
  792
  842
  893
  947
  1,003
  1,062
  1,123
  1,186
  1,253
  1,322
  1,395
  1,470
  1,550
  1,633
  1,720
  1,810
  1,906
Adjusted assets (=assets-cash), $m
  269
  297
  327
  358
  390
  423
  458
  495
  532
  572
  612
  655
  699
  744
  792
  842
  893
  947
  1,003
  1,062
  1,123
  1,186
  1,253
  1,322
  1,395
  1,470
  1,550
  1,633
  1,720
  1,810
  1,906
Revenue / Adjusted assets
  0.807
  0.808
  0.807
  0.807
  0.808
  0.809
  0.808
  0.806
  0.808
  0.806
  0.807
  0.806
  0.807
  0.808
  0.807
  0.806
  0.807
  0.807
  0.808
  0.807
  0.807
  0.807
  0.807
  0.807
  0.806
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
Average production assets, $m
  214
  236
  260
  285
  310
  337
  365
  394
  424
  455
  487
  521
  556
  592
  630
  670
  711
  754
  798
  845
  893
  944
  997
  1,052
  1,110
  1,170
  1,233
  1,299
  1,368
  1,441
  1,516
Working capital, $m
  4
  -24
  -27
  -29
  -32
  -35
  -37
  -40
  -43
  -47
  -50
  -53
  -57
  -61
  -65
  -69
  -73
  -77
  -82
  -87
  -91
  -97
  -102
  -108
  -114
  -120
  -126
  -133
  -140
  -148
  -155
Total debt, $m
  26
  32
  39
  46
  53
  61
  69
  77
  86
  95
  104
  114
  124
  134
  145
  156
  168
  180
  193
  206
  220
  234
  249
  265
  282
  299
  317
  336
  355
  376
  398
Total liabilities, $m
  61
  67
  74
  81
  88
  96
  104
  112
  121
  130
  139
  149
  159
  169
  180
  191
  203
  215
  228
  241
  255
  269
  284
  300
  317
  334
  352
  371
  390
  411
  433
Total equity, $m
  234
  230
  253
  276
  301
  327
  354
  382
  411
  442
  473
  506
  540
  575
  612
  651
  691
  732
  775
  821
  868
  917
  968
  1,022
  1,078
  1,137
  1,198
  1,262
  1,329
  1,400
  1,473
Total liabilities and equity, $m
  295
  297
  327
  357
  389
  423
  458
  494
  532
  572
  612
  655
  699
  744
  792
  842
  894
  947
  1,003
  1,062
  1,123
  1,186
  1,252
  1,322
  1,395
  1,471
  1,550
  1,633
  1,719
  1,811
  1,906
Debt-to-equity ratio
  0.111
  0.140
  0.160
  0.170
  0.180
  0.190
  0.190
  0.200
  0.210
  0.210
  0.220
  0.220
  0.230
  0.230
  0.240
  0.240
  0.240
  0.250
  0.250
  0.250
  0.250
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.270
  0.270
  0.270
  0.270
Adjusted equity ratio
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  25
  33
  40
  47
  55
  63
  71
  80
  89
  98
  108
  120
  130
  141
  153
  165
  177
  190
  204
  218
  233
  249
  265
  282
  300
  319
  339
  359
  381
  404
  427
Depreciation, amort., depletion, $m
  15
  17
  19
  20
  22
  24
  25
  27
  29
  31
  33
  33
  35
  37
  40
  42
  45
  47
  50
  53
  56
  59
  63
  66
  70
  74
  78
  82
  86
  91
  95
Funds from operations, $m
  45
  50
  59
  68
  77
  86
  97
  107
  118
  129
  141
  153
  165
  179
  193
  207
  222
  238
  254
  272
  289
  308
  328
  348
  370
  393
  416
  441
  467
  494
  523
Change in working capital, $m
  1
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
Cash from operations, $m
  44
  53
  61
  70
  79
  89
  99
  110
  121
  132
  144
  156
  169
  182
  196
  211
  226
  242
  259
  276
  294
  313
  333
  354
  376
  399
  423
  448
  474
  502
  530
Maintenance CAPEX, $m
  0
  -13
  -15
  -16
  -18
  -20
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -40
  -42
  -45
  -47
  -50
  -53
  -56
  -59
  -63
  -66
  -70
  -74
  -78
  -82
  -86
  -91
New CAPEX, $m
  -26
  -22
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -46
  -49
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -76
Cash from investing activities, $m
  -25
  -35
  -39
  -41
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -65
  -68
  -71
  -75
  -79
  -83
  -88
  -92
  -96
  -102
  -107
  -112
  -118
  -124
  -130
  -137
  -144
  -151
  -158
  -167
Free cash flow, $m
  19
  17
  23
  29
  36
  43
  50
  58
  66
  75
  83
  92
  101
  111
  121
  132
  143
  155
  167
  180
  193
  207
  221
  236
  252
  269
  286
  304
  323
  343
  364
Issuance/(repayment) of debt, $m
  -15
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
Issuance/(repurchase) of shares, $m
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -14
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
Total cash flow (excl. dividends), $m
  5
  23
  30
  36
  43
  51
  58
  66
  75
  83
  93
  101
  111
  121
  132
  143
  155
  167
  180
  193
  207
  221
  236
  252
  268
  286
  304
  323
  343
  364
  386
Retained Cash Flow (-), $m
  -30
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -74
Prev. year cash balance distribution, $m
 
  26
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  28
  7
  12
  18
  25
  31
  38
  46
  53
  61
  69
  77
  86
  95
  105
  115
  125
  136
  148
  160
  172
  185
  198
  212
  227
  243
  259
  276
  294
  312
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  26
  6
  11
  15
  19
  23
  26
  28
  31
  32
  33
  33
  33
  32
  31
  29
  27
  25
  23
  20
  18
  15
  13
  11
  9
  7
  6
  4
  3
  2
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
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Monarch Casino & Resort, Inc. (Monarch), through its subsidiary, owns and operates the Atlantis Casino Resort Spa (the Atlantis), a hotel/casino facility in Reno, Nevada. The Company also owns and operates Monarch Casino Black Hawk. The Company's segments include Atlantis and Monarch Casino Black Hawk. The Atlantis is located approximately three miles south of downtown in the area of Reno, Nevada. As of December 31, 2016, the Atlantis featured approximately 61,000 square feet of casino space; 824 guest rooms and suites; eight food outlets; two espresso and pastry bars; a 30,000 square foot health spa and salon with an enclosed year-round pool; two retail outlets offering clothing and traditional gift shop merchandise; an 8,000 square-foot family entertainment center, and approximately 52,000 square feet of banquet, convention and meeting room space.

FINANCIAL RATIOS  of  Monarch Casino&Resort (MCRI)

Valuation Ratios
P/E Ratio 29.5
Price to Sales 3.4
Price to Book 3.2
Price to Tangible Book
Price to Cash Flow 16.8
Price to Free Cash Flow 41
Growth Rates
Sales Growth Rate 7.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -31.6%
Cap. Spend. - 3 Yr. Gr. Rate 16.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 11.1%
Total Debt to Equity 11.1%
Interest Coverage 0
Management Effectiveness
Return On Assets 8.8%
Ret/ On Assets - 3 Yr. Avg. 7.5%
Return On Total Capital 9.9%
Ret/ On T. Cap. - 3 Yr. Avg. 8.4%
Return On Equity 11.4%
Return On Equity - 3 Yr. Avg. 10.2%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 51.6%
Gross Margin - 3 Yr. Avg. 51%
EBITDA Margin 24.4%
EBITDA Margin - 3 Yr. Avg. 23.2%
Operating Margin 18%
Oper. Margin - 3 Yr. Avg. 15.2%
Pre-Tax Margin 17.5%
Pre-Tax Margin - 3 Yr. Avg. 14.8%
Net Profit Margin 11.5%
Net Profit Margin - 3 Yr. Avg. 9.8%
Effective Tax Rate 34.2%
Eff/ Tax Rate - 3 Yr. Avg. 34%
Payout Ratio 0%

MCRI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MCRI stock intrinsic value calculation we used $217 million for the last fiscal year's total revenue generated by Monarch Casino&Resort. The default revenue input number comes from 2016 income statement of Monarch Casino&Resort. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MCRI stock valuation model: a) initial revenue growth rate of 10.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for MCRI is calculated based on our internal credit rating of Monarch Casino&Resort, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Monarch Casino&Resort.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MCRI stock the variable cost ratio is equal to 53.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $64 million in the base year in the intrinsic value calculation for MCRI stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Monarch Casino&Resort.

Corporate tax rate of 27% is the nominal tax rate for Monarch Casino&Resort. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MCRI stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MCRI are equal to 98.6%.

Life of production assets of 15.9 years is the average useful life of capital assets used in Monarch Casino&Resort operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MCRI is equal to -10.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $234 million for Monarch Casino&Resort - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 17.923 million for Monarch Casino&Resort is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Monarch Casino&Resort at the current share price and the inputted number of shares is $0.8 billion.

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COMPANY NEWS

▶ Monarch Casino posts 4Q profit   [Feb-21-18 05:02AM  Associated Press]
▶ 3 Casino Stocks to Buy Now   [Dec-18-17 12:44PM  Zacks]
▶ Monarch Casino posts 3Q profit   [05:59PM  Associated Press]
▶ 3 Casino Stocks to Buy Now   [Oct-16-17 01:33PM  Zacks]
▶ Stocks Showing Market Leadership: Caesars Entertainment Earns 91 RS Rating   [Sep-27-17 03:00AM  Investor's Business Daily]
▶ Monarch Casino posts 2Q profit   [Jul-25-17 09:59PM  Associated Press]
▶ Monarch Casino tops 1Q revenue forecasts   [Apr-25-17 05:02PM  Associated Press]
▶ Which Companies Are Now Outperforming 95% Of All Stocks?   [Apr-11-17 11:33AM  Investor's Business Daily]
▶ Monarch Casino Gets A Composite Rating Upgrade   [11:28AM  Investor's Business Daily]
▶ Thinly Traded, But No. 1-Ranked Casino Stock Wins Rating Upgrade   [Apr-06-17 11:55AM  Investor's Business Daily]
▶ Monarch Casino posts 4Q profit   [Feb-22-17 04:10PM  Associated Press]
▶ Hedge Funds Are Dumping Monarch Casino & Resort, Inc. (MCRI)   [Dec-10-16 03:08PM  at Insider Monkey]
Financial statements of MCRI
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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