Intrinsic value of MGM Resorts International - MGM

Previous Close

$30.71

  Intrinsic Value

$1.93

stock screener

  Rating & Target

str. sell

-94%

  Value-price divergence*

-122%

Previous close

$30.71

 
Intrinsic value

$1.93

 
Up/down potential

-94%

 
Rating

str. sell

 
Value-price divergence*

-122%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of MGM 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

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 17.5

 

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, %
  2.88
  22.50
  20.75
  19.18
  17.76
  16.48
  15.33
  14.30
  13.37
  12.53
  11.78
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
  7.13
  6.91
  6.72
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.82
Revenue, $m
  9,455
  11,582
  13,986
  16,667
  19,627
  22,862
  26,368
  30,138
  34,168
  38,450
  42,980
  47,751
  52,761
  58,007
  63,487
  69,203
  75,157
  81,352
  87,794
  94,490
  101,448
  108,679
  116,194
  124,006
  132,130
  140,580
  149,376
  158,533
  168,073
  178,016
  188,384
Variable operating expenses, $m
 
  11,738
  14,136
  16,812
  19,765
  22,993
  26,491
  30,253
  34,274
  38,547
  43,066
  47,645
  52,644
  57,878
  63,347
  69,050
  74,990
  81,172
  87,599
  94,280
  101,223
  108,438
  115,936
  123,731
  131,837
  140,269
  149,044
  158,182
  167,701
  177,622
  187,967
Fixed operating expenses, $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
Total operating expenses, $m
  7,375
  11,738
  14,136
  16,812
  19,765
  22,993
  26,491
  30,253
  34,274
  38,547
  43,066
  47,645
  52,644
  57,878
  63,347
  69,050
  74,990
  81,172
  87,599
  94,280
  101,223
  108,438
  115,936
  123,731
  131,837
  140,269
  149,044
  158,182
  167,701
  177,622
  187,967
Operating income, $m
  2,080
  -156
  -151
  -145
  -138
  -131
  -123
  -115
  -106
  -96
  -86
  106
  117
  129
  141
  153
  167
  180
  195
  210
  225
  241
  258
  275
  293
  312
  331
  352
  373
  395
  418
EBITDA, $m
  2,930
  994
  1,200
  1,431
  1,685
  1,962
  2,263
  2,587
  2,933
  3,300
  3,689
  4,098
  4,528
  4,979
  5,449
  5,939
  6,450
  6,982
  7,535
  8,110
  8,707
  9,328
  9,972
  10,643
  11,340
  12,066
  12,820
  13,606
  14,425
  15,278
  16,168
Interest expense (income), $m
  661
  662
  913
  1,197
  1,514
  1,864
  2,247
  2,662
  3,108
  3,584
  4,091
  4,626
  5,191
  5,783
  6,404
  7,052
  7,728
  8,432
  9,165
  9,927
  10,719
  11,542
  12,397
  13,286
  14,210
  15,171
  16,171
  17,211
  18,294
  19,422
  20,598
Earnings before tax, $m
  1,259
  -818
  -1,063
  -1,342
  -1,652
  -1,995
  -2,370
  -2,776
  -3,213
  -3,681
  -4,177
  -4,521
  -5,074
  -5,655
  -6,263
  -6,899
  -7,562
  -8,252
  -8,970
  -9,718
  -10,494
  -11,301
  -12,140
  -13,011
  -13,917
  -14,859
  -15,839
  -16,859
  -17,921
  -19,028
  -20,181
Tax expense, $m
  22
  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
Net income, $m
  1,101
  -818
  -1,063
  -1,342
  -1,652
  -1,995
  -2,370
  -2,776
  -3,213
  -3,681
  -4,177
  -4,521
  -5,074
  -5,655
  -6,263
  -6,899
  -7,562
  -8,252
  -8,970
  -9,718
  -10,494
  -11,301
  -12,140
  -13,011
  -13,917
  -14,859
  -15,839
  -16,859
  -17,921
  -19,028
  -20,181

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,447
  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
  28,173
  32,719
  39,508
  47,083
  55,444
  64,582
  74,485
  85,137
  96,519
  108,616
  121,411
  134,890
  149,042
  163,861
  179,343
  195,490
  212,308
  229,808
  248,006
  266,920
  286,576
  307,002
  328,231
  350,299
  373,247
  397,120
  421,965
  447,834
  474,783
  502,871
  532,159
Adjusted assets (=assets-cash), $m
  26,726
  32,719
  39,508
  47,083
  55,444
  64,582
  74,485
  85,137
  96,519
  108,616
  121,411
  134,890
  149,042
  163,861
  179,343
  195,490
  212,308
  229,808
  248,006
  266,920
  286,576
  307,002
  328,231
  350,299
  373,247
  397,120
  421,965
  447,834
  474,783
  502,871
  532,159
Revenue / Adjusted assets
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
Average production assets, $m
  21,025
  25,759
  31,104
  37,068
  43,651
  50,845
  58,642
  67,028
  75,989
  85,513
  95,587
  106,199
  117,341
  129,007
  141,196
  153,909
  167,149
  180,927
  195,254
  210,145
  225,620
  241,702
  258,415
  275,789
  293,856
  312,651
  332,211
  352,578
  373,795
  395,908
  418,967
Working capital, $m
  -63
  -1,158
  -1,399
  -1,667
  -1,963
  -2,286
  -2,637
  -3,014
  -3,417
  -3,845
  -4,298
  -4,775
  -5,276
  -5,801
  -6,349
  -6,920
  -7,516
  -8,135
  -8,779
  -9,449
  -10,145
  -10,868
  -11,619
  -12,401
  -13,213
  -14,058
  -14,938
  -15,853
  -16,807
  -17,802
  -18,838
Total debt, $m
  12,988
  17,897
  23,471
  29,690
  36,555
  44,057
  52,187
  60,932
  70,277
  80,209
  90,714
  101,780
  113,399
  125,565
  138,276
  151,532
  165,340
  179,708
  194,648
  210,177
  226,314
  243,084
  260,513
  278,631
  297,471
  317,070
  337,468
  358,707
  380,832
  403,892
  427,938
Total liabilities, $m
  21,953
  26,862
  32,436
  38,655
  45,520
  53,022
  61,152
  69,897
  79,242
  89,174
  99,679
  110,745
  122,364
  134,530
  147,241
  160,497
  174,305
  188,673
  203,613
  219,142
  235,279
  252,049
  269,478
  287,596
  306,436
  326,035
  346,433
  367,672
  389,797
  412,857
  436,903
Total equity, $m
  6,220
  5,857
  7,072
  8,428
  9,924
  11,560
  13,333
  15,239
  17,277
  19,442
  21,733
  24,145
  26,679
  29,331
  32,102
  34,993
  38,003
  41,136
  44,393
  47,779
  51,297
  54,953
  58,753
  62,704
  66,811
  71,084
  75,532
  80,162
  84,986
  90,014
  95,257
Total liabilities and equity, $m
  28,173
  32,719
  39,508
  47,083
  55,444
  64,582
  74,485
  85,136
  96,519
  108,616
  121,412
  134,890
  149,043
  163,861
  179,343
  195,490
  212,308
  229,809
  248,006
  266,921
  286,576
  307,002
  328,231
  350,300
  373,247
  397,119
  421,965
  447,834
  474,783
  502,871
  532,160
Debt-to-equity ratio
  2.088
  3.060
  3.320
  3.520
  3.680
  3.810
  3.910
  4.000
  4.070
  4.130
  4.170
  4.220
  4.250
  4.280
  4.310
  4.330
  4.350
  4.370
  4.380
  4.400
  4.410
  4.420
  4.430
  4.440
  4.450
  4.460
  4.470
  4.470
  4.480
  4.490
  4.490
Adjusted equity ratio
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,101
  -818
  -1,063
  -1,342
  -1,652
  -1,995
  -2,370
  -2,776
  -3,213
  -3,681
  -4,177
  -4,521
  -5,074
  -5,655
  -6,263
  -6,899
  -7,562
  -8,252
  -8,970
  -9,718
  -10,494
  -11,301
  -12,140
  -13,011
  -13,917
  -14,859
  -15,839
  -16,859
  -17,921
  -19,028
  -20,181
Depreciation, amort., depletion, $m
  850
  1,150
  1,351
  1,575
  1,823
  2,093
  2,386
  2,702
  3,038
  3,396
  3,775
  3,992
  4,411
  4,850
  5,308
  5,786
  6,284
  6,802
  7,340
  7,900
  8,482
  9,087
  9,715
  10,368
  11,047
  11,754
  12,489
  13,255
  14,052
  14,884
  15,751
Funds from operations, $m
  1,773
  332
  288
  233
  170
  98
  16
  -75
  -175
  -284
  -402
  -528
  -662
  -805
  -955
  -1,113
  -1,278
  -1,450
  -1,630
  -1,817
  -2,012
  -2,215
  -2,425
  -2,643
  -2,870
  -3,106
  -3,350
  -3,605
  -3,869
  -4,144
  -4,430
Change in working capital, $m
  239
  -213
  -240
  -268
  -296
  -323
  -351
  -377
  -403
  -428
  -453
  -477
  -501
  -525
  -548
  -572
  -595
  -620
  -644
  -670
  -696
  -723
  -751
  -781
  -812
  -845
  -880
  -916
  -954
  -994
  -1,037
Cash from operations, $m
  1,534
  545
  528
  502
  466
  421
  367
  302
  228
  144
  51
  -51
  -161
  -280
  -407
  -541
  -682
  -831
  -986
  -1,148
  -1,316
  -1,491
  -1,673
  -1,862
  -2,058
  -2,260
  -2,471
  -2,689
  -2,915
  -3,150
  -3,393
Maintenance CAPEX, $m
  0
  -790
  -968
  -1,169
  -1,394
  -1,641
  -1,911
  -2,205
  -2,520
  -2,857
  -3,215
  -3,593
  -3,992
  -4,411
  -4,850
  -5,308
  -5,786
  -6,284
  -6,802
  -7,340
  -7,900
  -8,482
  -9,087
  -9,715
  -10,368
  -11,047
  -11,754
  -12,489
  -13,255
  -14,052
  -14,884
New CAPEX, $m
  -2,262
  -4,734
  -5,345
  -5,964
  -6,582
  -7,194
  -7,796
  -8,386
  -8,962
  -9,524
  -10,073
  -10,612
  -11,142
  -11,667
  -12,189
  -12,712
  -13,241
  -13,778
  -14,327
  -14,891
  -15,475
  -16,081
  -16,713
  -17,374
  -18,067
  -18,795
  -19,560
  -20,367
  -21,217
  -22,113
  -23,059
Cash from investing activities, $m
  -2,276
  -5,524
  -6,313
  -7,133
  -7,976
  -8,835
  -9,707
  -10,591
  -11,482
  -12,381
  -13,288
  -14,205
  -15,134
  -16,078
  -17,039
  -18,020
  -19,027
  -20,062
  -21,129
  -22,231
  -23,375
  -24,563
  -25,800
  -27,089
  -28,435
  -29,842
  -31,314
  -32,856
  -34,472
  -36,165
  -37,943
Free cash flow, $m
  -742
  -4,980
  -5,785
  -6,632
  -7,510
  -8,414
  -9,341
  -10,288
  -11,254
  -12,237
  -13,237
  -14,256
  -15,296
  -16,358
  -17,446
  -18,562
  -19,709
  -20,892
  -22,114
  -23,379
  -24,692
  -26,055
  -27,473
  -28,951
  -30,493
  -32,102
  -33,785
  -35,545
  -37,387
  -39,315
  -41,336
Issuance/(repayment) of debt, $m
  -301
  4,917
  5,574
  6,220
  6,864
  7,502
  8,130
  8,745
  9,345
  9,932
  10,505
  11,066
  11,619
  12,166
  12,711
  13,257
  13,808
  14,368
  14,940
  15,529
  16,138
  16,770
  17,429
  18,118
  18,840
  19,599
  20,398
  21,239
  22,125
  23,060
  24,046
Issuance/(repurchase) of shares, $m
  1,255
  1,894
  2,279
  2,698
  3,149
  3,631
  4,143
  4,683
  5,251
  5,846
  6,467
  6,933
  7,607
  8,307
  9,034
  9,789
  10,572
  11,384
  12,228
  13,103
  14,012
  14,957
  15,940
  16,961
  18,025
  19,132
  20,287
  21,490
  22,745
  24,055
  25,423
Cash from financing (excl. dividends), $m  
  519
  6,811
  7,853
  8,918
  10,013
  11,133
  12,273
  13,428
  14,596
  15,778
  16,972
  17,999
  19,226
  20,473
  21,745
  23,046
  24,380
  25,752
  27,168
  28,632
  30,150
  31,727
  33,369
  35,079
  36,865
  38,731
  40,685
  42,729
  44,870
  47,115
  49,469
Total cash flow (excl. dividends), $m
  -224
  1,831
  2,067
  2,285
  2,504
  2,719
  2,932
  3,140
  3,343
  3,541
  3,735
  3,743
  3,930
  4,115
  4,299
  4,484
  4,670
  4,860
  5,053
  5,253
  5,458
  5,672
  5,895
  6,128
  6,373
  6,629
  6,900
  7,184
  7,484
  7,800
  8,133
Retained Cash Flow (-), $m
  -1,100
  -1,894
  -2,279
  -2,698
  -3,149
  -3,631
  -4,143
  -4,683
  -5,251
  -5,846
  -6,467
  -6,933
  -7,607
  -8,307
  -9,034
  -9,789
  -10,572
  -11,384
  -12,228
  -13,103
  -14,012
  -14,957
  -15,940
  -16,961
  -18,025
  -19,132
  -20,287
  -21,490
  -22,745
  -24,055
  -25,423
Prev. year cash balance distribution, $m
 
  1,439
  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
 
  1,376
  -212
  -412
  -645
  -912
  -1,211
  -1,543
  -1,908
  -2,305
  -2,732
  -3,190
  -3,677
  -4,192
  -4,735
  -5,305
  -5,902
  -6,525
  -7,174
  -7,851
  -8,554
  -9,285
  -10,044
  -10,833
  -11,652
  -12,503
  -13,387
  -14,306
  -15,261
  -16,255
  -17,290
Discount rate, %
 
  9.70
  10.19
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.38
  29.79
  31.28
  32.85
  34.49
  36.21
  38.03
  39.93
PV of cash for distribution, $m
 
  1,254
  -174
  -304
  -422
  -522
  -601
  -656
  -686
  -691
  -673
  -635
  -583
  -520
  -451
  -380
  -312
  -249
  -193
  -146
  -107
  -76
  -52
  -35
  -22
  -14
  -8
  -5
  -3
  -1
  -1
Current shareholders' claim on cash, %
  100
  87.7
  77.0
  67.8
  59.9
  53.0
  47.0
  41.8
  37.2
  33.2
  29.7
  26.7
  24.0
  21.6
  19.5
  17.6
  15.9
  14.4
  13.0
  11.8
  10.6
  9.6
  8.7
  7.9
  7.2
  6.5
  5.9
  5.4
  4.9
  4.4
  4.0

MGM Resorts International, through its wholly owned subsidiaries, owns and/or operates casino resorts in the United States and China. The company operates through two segments, Wholly Owned Domestic Resorts and MGM China. Its casino resorts offer gaming, hotel, convention, dining, entertainment, retail, and other resort amenities. Its casino operations include various slots, table games, and race and sports book wagering. The company operates 12 wholly owned resorts in the United States; and MGM Macau resort and casino in China, as well as develops an integrated casino, hotel, and entertainment resort on the Cotai Strip, Macau. The company also owns and operates Shadow Creek golf course, Primm Valley Golf Club, and Fallen Oak golf course. The company serves premium gaming customers; leisure and wholesale travel customers; business travelers; and group customers, including conventions, trade associations, and small meetings. The company was formerly known as MGM MIRAGE and changed its name to MGM Resorts International in June 2010. MGM Resorts International was founded in 1986 and is based in Las Vegas, Nevada.

FINANCIAL RATIOS  of  MGM Resorts International (MGM)

Valuation Ratios
P/E Ratio 16
Price to Sales 1.9
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 11.5
Price to Free Cash Flow -24.2
Growth Rates
Sales Growth Rate 2.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 54.2%
Cap. Spend. - 3 Yr. Gr. Rate 32.1%
Financial Strength
Quick Ratio 181
Current Ratio 0
LT Debt to Equity 208.7%
Total Debt to Equity 208.8%
Interest Coverage 3
Management Effectiveness
Return On Assets 6.6%
Ret/ On Assets - 3 Yr. Avg. 2.7%
Return On Total Capital 5.9%
Ret/ On T. Cap. - 3 Yr. Avg. 0.9%
Return On Equity 19.4%
Return On Equity - 3 Yr. Avg. 2%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 41.9%
Gross Margin - 3 Yr. Avg. 39.2%
EBITDA Margin 29.3%
EBITDA Margin - 3 Yr. Avg. 18.4%
Operating Margin 22%
Oper. Margin - 3 Yr. Avg. 11.1%
Pre-Tax Margin 13.3%
Pre-Tax Margin - 3 Yr. Avg. 2%
Net Profit Margin 11.6%
Net Profit Margin - 3 Yr. Avg. 1.8%
Effective Tax Rate 1.7%
Eff/ Tax Rate - 3 Yr. Avg. 23.8%
Payout Ratio 0%

MGM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MGM stock intrinsic value calculation we used $9455 million for the last fiscal year's total revenue generated by MGM Resorts International. The default revenue input number comes from 2016 income statement of MGM Resorts International. 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 MGM stock valuation model: a) initial revenue growth rate of 22.5% 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 9.7%, whose default value for MGM is calculated based on our internal credit rating of MGM Resorts International, 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 MGM Resorts International.
    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 MGM stock the variable cost ratio is equal to 101.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for MGM 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 5.1% for MGM Resorts International.

Corporate tax rate of 27% is the nominal tax rate for MGM Resorts International. 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 MGM 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 MGM are equal to 222.4%.

Life of production assets of 26.6 years is the average useful life of capital assets used in MGM Resorts International 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 MGM is equal to -10%. 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 - $6220 million for MGM Resorts International - 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 570.257 million for MGM Resorts International 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 MGM Resorts International at the current share price and the inputted number of shares is $17.5 billion.

RELATED COMPANIES Price Int.Val. Rating
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MCRI Monarch Casino 34.13 25.38  hold
PENN Penn National 20.38 0.04  str.sell

COMPANY NEWS

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▶ Casino industry in US has new rules for responsible gambling   [Aug-03-17 10:30PM  Associated Press]
▶ MGM Resorts eyes in-house sale of National Harbor casino in short order   [Aug-02-17 01:50PM  American City Business Journals]
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▶ Macao to See High Growth In Hotel Room Supply   [10:36AM  Market Realist]
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▶ Court rejects MGM lawsuit as company competes with tribes   [Jun-21-17 04:17PM  Associated Press]
▶ Time For Japan To Ante Up On Casino Legalization   [Jun-18-17 07:28AM  Forbes]
▶ [$$] Connecticut Lawmakers Approve Third Casino   [Jun-08-17 12:33AM  The Wall Street Journal]
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Stock chart of MGM Financial statements of MGM
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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