Intrinsic value of Monarch Casino & Resort, Inc. - MCRI

Previous Close

$42.49

  Intrinsic Value

$8.02

stock screener

  Rating & Target

str. sell

-81%

Previous close

$42.49

 
Intrinsic value

$8.02

 
Up/down potential

-81%

 
Rating

str. 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

Revenue (in 0001), $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 0.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.60
  6.44
  6.30
  6.17
  6.05
  5.94
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.18
  5.16
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.08
Revenue, $m
  256
  272
  289
  307
  326
  345
  365
  387
  409
  431
  455
  481
  507
  534
  563
  593
  624
  657
  691
  728
  765
  805
  846
  890
  936
  983
  1,034
  1,086
  1,142
  1,199
Variable operating expenses, $m
  204
  217
  231
  245
  260
  275
  291
  308
  325
  343
  359
  379
  399
  421
  444
  467
  492
  518
  545
  574
  603
  635
  667
  702
  738
  775
  815
  856
  900
  946
Fixed operating expenses, $m
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  8
  9
  9
  9
  9
  9
  10
Total operating expenses, $m
  209
  222
  236
  250
  266
  281
  297
  314
  331
  349
  365
  385
  406
  428
  451
  474
  499
  525
  553
  582
  611
  643
  675
  710
  747
  784
  824
  865
  909
  956
Operating income, $m
  46
  50
  53
  57
  61
  65
  69
  73
  78
  82
  90
  95
  101
  106
  112
  118
  125
  132
  139
  146
  154
  162
  171
  180
  189
  199
  210
  221
  232
  244
EBITDA, $m
  64
  68
  73
  78
  82
  88
  93
  98
  104
  110
  117
  123
  130
  137
  145
  153
  161
  170
  179
  189
  199
  209
  220
  232
  244
  257
  270
  284
  299
  314
Interest expense (income), $m
  0
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  20
  21
  22
  23
  25
  26
  28
  29
  31
  33
  34
  36
Earnings before tax, $m
  41
  44
  47
  50
  53
  57
  60
  64
  67
  71
  78
  83
  87
  92
  97
  102
  108
  113
  119
  126
  132
  139
  146
  154
  162
  170
  179
  188
  198
  208
Tax expense, $m
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  39
  42
  44
  46
  48
  51
  53
  56
Net income, $m
  30
  32
  34
  36
  39
  41
  44
  46
  49
  52
  57
  60
  64
  67
  71
  75
  79
  83
  87
  92
  96
  101
  107
  112
  118
  124
  131
  137
  144
  152

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  485
  517
  549
  583
  618
  655
  694
  733
  775
  819
  864
  912
  962
  1,014
  1,068
  1,125
  1,184
  1,247
  1,312
  1,381
  1,452
  1,527
  1,606
  1,689
  1,775
  1,866
  1,961
  2,061
  2,166
  2,276
Adjusted assets (=assets-cash), $m
  485
  517
  549
  583
  618
  655
  694
  733
  775
  819
  864
  912
  962
  1,014
  1,068
  1,125
  1,184
  1,247
  1,312
  1,381
  1,452
  1,527
  1,606
  1,689
  1,775
  1,866
  1,961
  2,061
  2,166
  2,276
Revenue / Adjusted assets
  0.528
  0.526
  0.526
  0.527
  0.528
  0.527
  0.526
  0.528
  0.528
  0.526
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
Average production assets, $m
  348
  371
  394
  418
  444
  470
  497
  526
  556
  587
  620
  654
  690
  727
  766
  807
  850
  894
  941
  990
  1,042
  1,096
  1,152
  1,211
  1,273
  1,339
  1,407
  1,479
  1,554
  1,633
Working capital, $m
  -46
  -49
  -52
  -55
  -59
  -62
  -66
  -70
  -74
  -78
  -82
  -86
  -91
  -96
  -101
  -107
  -112
  -118
  -124
  -131
  -138
  -145
  -152
  -160
  -168
  -177
  -186
  -196
  -205
  -216
Total debt, $m
  105
  115
  126
  138
  150
  162
  175
  188
  203
  217
  233
  249
  266
  283
  302
  321
  341
  362
  384
  407
  431
  457
  483
  511
  541
  571
  604
  637
  673
  710
Total liabilities, $m
  164
  175
  186
  197
  209
  221
  234
  248
  262
  277
  292
  308
  325
  343
  361
  380
  400
  421
  444
  467
  491
  516
  543
  571
  600
  631
  663
  697
  732
  769
Total equity, $m
  321
  342
  364
  386
  409
  434
  459
  486
  513
  542
  572
  604
  637
  671
  707
  745
  784
  825
  869
  914
  961
  1,011
  1,063
  1,118
  1,175
  1,235
  1,298
  1,365
  1,434
  1,507
Total liabilities and equity, $m
  485
  517
  550
  583
  618
  655
  693
  734
  775
  819
  864
  912
  962
  1,014
  1,068
  1,125
  1,184
  1,246
  1,313
  1,381
  1,452
  1,527
  1,606
  1,689
  1,775
  1,866
  1,961
  2,062
  2,166
  2,276
Debt-to-equity ratio
  0.330
  0.340
  0.350
  0.360
  0.370
  0.370
  0.380
  0.390
  0.390
  0.400
  0.410
  0.410
  0.420
  0.420
  0.430
  0.430
  0.430
  0.440
  0.440
  0.450
  0.450
  0.450
  0.450
  0.460
  0.460
  0.460
  0.460
  0.470
  0.470
  0.470
Adjusted equity ratio
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  30
  32
  34
  36
  39
  41
  44
  46
  49
  52
  57
  60
  64
  67
  71
  75
  79
  83
  87
  92
  96
  101
  107
  112
  118
  124
  131
  137
  144
  152
Depreciation, amort., depletion, $m
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  27
  28
  30
  31
  33
  35
  36
  38
  40
  42
  45
  47
  49
  52
  55
  57
  60
  63
  67
  70
Funds from operations, $m
  48
  51
  54
  57
  61
  64
  68
  72
  76
  80
  84
  88
  93
  98
  104
  109
  115
  121
  127
  134
  141
  149
  156
  164
  173
  182
  191
  201
  211
  222
Change in working capital, $m
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
Cash from operations, $m
  51
  54
  57
  60
  64
  68
  72
  76
  80
  84
  88
  93
  98
  103
  109
  115
  121
  127
  134
  141
  148
  156
  164
  172
  181
  190
  200
  210
  221
  232
Maintenance CAPEX, $m
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -45
  -47
  -49
  -52
  -55
  -57
  -60
  -63
  -67
New CAPEX, $m
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -57
  -59
  -62
  -65
  -68
  -72
  -75
  -79
Cash from investing activities, $m
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -70
  -74
  -78
  -81
  -85
  -89
  -93
  -99
  -104
  -108
  -114
  -120
  -125
  -132
  -138
  -146
Free cash flow, $m
  15
  16
  18
  19
  21
  22
  24
  26
  27
  29
  30
  32
  34
  36
  39
  41
  43
  46
  48
  51
  54
  57
  60
  63
  67
  71
  74
  78
  82
  87
Issuance/(repayment) of debt, $m
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  35
  37
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  35
  37
Total cash flow (excl. dividends), $m
  25
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  48
  51
  54
  57
  60
  63
  67
  70
  74
  78
  82
  87
  91
  96
  101
  106
  112
  118
  124
Retained Cash Flow (-), $m
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -73
Prev. year cash balance distribution, $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 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
  5
  6
  7
  8
  9
  10
  11
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
  43
  46
  48
  51
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
  5
  6
  6
  7
  7
  8
  8
  8
  8
  8
  7
  7
  7
  7
  6
  6
  5
  5
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
Current shareholders' claim on cash, %
  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
  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, Inc. (MCRI)

Valuation Ratios
P/E Ratio 29.7
Price to Sales 3.4
Price to Book 3.2
Price to Tangible Book
Price to Cash Flow 16.9
Price to Free Cash Flow 41.2
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 $240 million for the last fiscal year's total revenue generated by Monarch Casino & Resort, Inc.. The default revenue input number comes from 0001 income statement of Monarch Casino & Resort, Inc.. 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 6.6% 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, Inc., 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, Inc..
    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 80%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $5 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 5.4% for Monarch Casino & Resort, Inc..

Corporate tax rate of 27% is the nominal tax rate for Monarch Casino & Resort, Inc.. 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 136.1%.

Life of production assets of 23.3 years is the average useful life of capital assets used in Monarch Casino & Resort, Inc. 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 -18%. 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 - $301.182 million for Monarch Casino & Resort, Inc. - 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 17.919 million for Monarch Casino & Resort, Inc. 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, Inc. at the current share price and the inputted number of shares is $0.8 billion.

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