Intrinsic value of Monarch Casino&Resort - MCRI

Previous Close

$39.02

  Intrinsic Value

$13.18

stock screener

  Rating & Target

str. sell

-66%

Previous close

$39.02

 
Intrinsic value

$13.18

 
Up/down potential

-66%

 
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 0.7

 

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, %
  2.90
  3.11
  3.30
  3.47
  3.62
  3.76
  3.88
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
Revenue, $m
  237
  245
  253
  262
  271
  281
  292
  304
  316
  330
  344
  359
  374
  391
  409
  427
  447
  468
  490
  513
  537
  563
  590
  618
  648
  680
  713
  748
  784
  823
Variable operating expenses, $m
  195
  201
  208
  215
  223
  231
  240
  249
  259
  270
  279
  291
  303
  317
  331
  346
  362
  379
  397
  416
  435
  456
  478
  501
  525
  551
  578
  606
  635
  667
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
  195
  201
  208
  215
  223
  231
  240
  249
  259
  270
  279
  291
  303
  317
  331
  346
  362
  379
  397
  416
  435
  456
  478
  501
  525
  551
  578
  606
  635
  667
Operating income, $m
  42
  44
  45
  47
  48
  50
  53
  55
  57
  60
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  117
  123
  129
  135
  142
  149
  156
EBITDA, $m
  60
  62
  64
  66
  68
  71
  74
  76
  80
  83
  86
  90
  94
  98
  103
  108
  112
  118
  123
  129
  135
  142
  148
  156
  163
  171
  179
  188
  197
  207
Interest expense (income), $m
  0
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
Earnings before tax, $m
  41
  42
  43
  45
  47
  48
  50
  52
  55
  57
  62
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  101
  105
  110
  116
  121
  127
  133
  139
  146
Tax expense, $m
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  38
  39
Net income, $m
  30
  31
  32
  33
  34
  35
  37
  38
  40
  42
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
  70
  73
  77
  81
  84
  88
  93
  97
  102
  107

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
  341
  352
  363
  376
  390
  404
  420
  437
  455
  474
  494
  515
  538
  562
  587
  614
  643
  672
  704
  737
  772
  809
  848
  888
  931
  977
  1,024
  1,074
  1,127
  1,182
Adjusted assets (=assets-cash), $m
  341
  352
  363
  376
  390
  404
  420
  437
  455
  474
  494
  515
  538
  562
  587
  614
  643
  672
  704
  737
  772
  809
  848
  888
  931
  977
  1,024
  1,074
  1,127
  1,182
Revenue / Adjusted assets
  0.695
  0.696
  0.697
  0.697
  0.695
  0.696
  0.695
  0.696
  0.695
  0.696
  0.696
  0.697
  0.695
  0.696
  0.697
  0.695
  0.695
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
Average production assets, $m
  255
  262
  271
  280
  291
  302
  313
  326
  339
  353
  368
  384
  401
  419
  438
  458
  479
  502
  525
  550
  576
  604
  632
  663
  695
  729
  764
  801
  841
  882
Working capital, $m
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -81
Total debt, $m
  28
  30
  33
  35
  38
  41
  44
  47
  51
  54
  58
  63
  67
  72
  77
  82
  88
  94
  100
  107
  113
  121
  128
  137
  145
  154
  163
  173
  184
  195
Total liabilities, $m
  68
  70
  72
  74
  77
  80
  83
  86
  90
  94
  98
  102
  107
  111
  116
  122
  127
  133
  139
  146
  153
  160
  168
  176
  184
  193
  203
  213
  223
  234
Total equity, $m
  274
  282
  291
  301
  312
  324
  337
  350
  365
  380
  396
  413
  431
  451
  471
  493
  515
  539
  565
  591
  619
  649
  680
  713
  747
  783
  821
  861
  903
  948
Total liabilities and equity, $m
  342
  352
  363
  375
  389
  404
  420
  436
  455
  474
  494
  515
  538
  562
  587
  615
  642
  672
  704
  737
  772
  809
  848
  889
  931
  976
  1,024
  1,074
  1,126
  1,182
Debt-to-equity ratio
  0.100
  0.110
  0.110
  0.120
  0.120
  0.130
  0.130
  0.130
  0.140
  0.140
  0.150
  0.150
  0.160
  0.160
  0.160
  0.170
  0.170
  0.170
  0.180
  0.180
  0.180
  0.190
  0.190
  0.190
  0.190
  0.200
  0.200
  0.200
  0.200
  0.210
Adjusted equity ratio
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  30
  31
  32
  33
  34
  35
  37
  38
  40
  42
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
  70
  73
  77
  81
  84
  88
  93
  97
  102
  107
Depreciation, amort., depletion, $m
  18
  18
  19
  19
  20
  20
  21
  22
  23
  23
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
  38
  40
  42
  44
  46
  49
  51
Funds from operations, $m
  47
  49
  50
  52
  54
  56
  58
  60
  62
  65
  67
  70
  73
  76
  79
  83
  86
  90
  94
  99
  103
  108
  113
  119
  124
  130
  137
  143
  150
  158
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
Cash from operations, $m
  48
  49
  51
  53
  55
  57
  59
  61
  64
  66
  68
  71
  74
  77
  81
  84
  88
  92
  97
  101
  106
  111
  116
  122
  127
  134
  140
  147
  154
  161
Maintenance CAPEX, $m
  -14
  -15
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -49
New CAPEX, $m
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
Cash from investing activities, $m
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -53
  -55
  -58
  -60
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -90
Free cash flow, $m
  27
  27
  27
  28
  28
  29
  30
  30
  31
  32
  33
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  55
  57
  60
  62
  65
  68
  72
Issuance/(repayment) of debt, $m
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
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  
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
Total cash flow (excl. dividends), $m
  29
  29
  30
  30
  31
  32
  33
  34
  35
  36
  37
  38
  39
  41
  43
  44
  46
  48
  50
  53
  55
  57
  60
  63
  66
  69
  72
  75
  79
  82
Retained Cash Flow (-), $m
  -7
  -9
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
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
  22
  20
  20
  20
  20
  20
  20
  20
  21
  21
  20
  21
  21
  22
  22
  23
  24
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  37
  38
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
  21
  19
  18
  17
  16
  15
  14
  13
  12
  11
  10
  9
  8
  7
  7
  6
  5
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
  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
  100.0
  100.0
  100.0
  100.0

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 27.3
Price to Sales 3.1
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 15.5
Price to Free Cash Flow 37.9
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 $230.726 million for the last fiscal year's total revenue generated by Monarch Casino&Resort. The default revenue input number comes from 0001 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 2.9% 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 82.3%.

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 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.

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 107.2%.

Life of production assets of 17.3 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 -9.8%. 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 - $266.474 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 17.369 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 $0.7 billion.

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COMPANY NEWS

▶ Monarch Casino: 3Q Earnings Snapshot   [05:15PM  Associated Press]
▶ Monarch Casino: 2Q Earnings Snapshot   [Jul-24-18 05:06PM  Associated Press]
▶ Americans support legal sports gambling   [May-18-18 01:14PM  Yahoo Finance Video]
▶ Monarch Casino: 1Q Earnings Snapshot   [Apr-26-18 05:38PM  Associated Press]
▶ Top Stocks in Gaming   [Apr-17-18 05:45PM  Motley Fool]
▶ 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]

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