Wynn Macau’s 49% Stock Surge in 2024 Sparks Debate on True Market Value

If you are standing at a crossroads with Wynn Macau stock, you are not alone. Investors everywhere are watching their screens after an impressive 49.4% surge over the last year. In just the past 30 days, shares have gained 10.8%, topping off a year-to-date return of 28.5%. Even more telling is the three-year move, up 55%. Of course, not everything has been smooth sailing. Wynn Macau is still down 44.8% over five years, so the ride has had its bumps.

What's fueling this confidence boost? Market buzz has certainly poured in thanks to improved sentiment around Macau's gaming sector and growing optimism about travel and tourism in the region. We have also seen global investors warming up to Asia’s reopening themes, shifting their view on risk and potential reward.

If you are trying to figure out whether to hold, buy, or take profits, it helps to cut through the noise and get clear on how attractively valued Wynn Macau really is. Our deep dive into the numbers shows the company is undervalued on just 2 out of 6 key valuation checks, giving it a value score of 2. So, what does that mean for you as a current or prospective shareholder?

Let’s walk through the main valuation approaches and see where Wynn Macau stands. And stay tuned, because later on, I will share an even more insightful way to look at this stock’s true value.

Wynn Macau scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Wynn Macau Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a core tool for estimating what a company is really worth. It works by forecasting a business’s future cash flows and then discounting those amounts back to today’s dollars, giving us a present-value estimate of the company.

For Wynn Macau, based on the 2 Stage Free Cash Flow to Equity model, the company generated HK$5,983.7 Million in Free Cash Flow over the last twelve months. Analysts forecast this figure to grow steadily, with projections reaching HK$8,558.3 Million by 2035. Up through 2027, forecasts are driven by analyst estimates. From 2028 onwards, future growth is extrapolated based on historical patterns and expected industry conditions.

Putting these numbers together, the DCF model calculates an intrinsic value of HK$12.34 per share. This figure is notably higher than the current market price, indicating the stock sits at a 44.4% discount to its calculated fair value. According to this approach, Wynn Macau shares appear significantly undervalued compared to what the company’s future cash flows suggest they should be worth.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Wynn Macau.

Our Discounted Cash Flow (DCF) analysis suggests Wynn Macau is undervalued by 44.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Wynn Macau Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation tool for profitable companies like Wynn Macau because it directly links a stock’s share price with its underlying earnings performance. Investors often look to the PE ratio to gauge how much the market is willing to pay for one dollar of current earnings, and it can give a quick sense of whether a company is attractively valued, overhyped, or somewhere in between.

It’s important to remember that what qualifies as a “normal” or “fair” PE ratio can vary depending on expectations for future growth and the risks associated with the business. Companies with faster expected growth or lower risk usually deserve a higher PE, while slow growers or riskier firms typically trade at lower multiples.

Wynn Macau is currently trading at a PE ratio of 19.53x. To put that in context, the average for its direct peers stands at 17.84x and the broader Hospitality industry’s average is 16.86x. This means Wynn Macau is priced at a premium to both its immediate competitors and the sector overall.

This is where Simply Wall St’s "Fair Ratio" comes into play. The Fair Ratio is not just an average; it is a tailored metric that incorporates the company’s earnings growth prospects, profit margin, risk profile, market cap, and position within the industry. This broader approach makes it a more nuanced measure than just comparing against peers or industry averages.

For Wynn Macau, the Fair Ratio is calculated at 19.07x, which is only a fraction below the current PE of 19.53x. This suggests the market is pricing Wynn Macau almost exactly in line with what it should be given all those underlying factors.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Wynn Macau Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple and intuitive tool that lets investors connect their personal view or “story” about a company, such as why it might grow or slow down, with their financial expectations like revenue, earnings, and margins. Narratives bridge the gap between a company’s story, a forecast built from your assumptions, and the fair value that these forecasts produce.

Available to everyone on the Simply Wall St Community page, Narratives make it easy for anyone to build and compare investment cases using dynamic, real-time data. As news or earnings updates roll in, Narratives refresh so your outlook can stay up to date. By comparing the Fair Value generated from your Narrative to today’s market Price, you can decide whether to hold, buy, or sell based on your own perspective, not just the latest headline. For instance, some investors build a narrative with an optimistic fair value for Wynn Macau, while others take a much more cautious view, showing just how powerful and personal this approach can be.

Do you think there's more to the story for Wynn Macau? Create your own Narrative to let the Community know!

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.

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