Should Your Next Investment In The Consumer Industry Be In Monarch Casino & Resort Inc (NASDAQ:MCRI)?

Monarch Casino & Resort Inc (NASDAQ:MCRI), a US$832.89m small-cap, is a consumer discretionary company operating in an industry, whose sales are driven primarily by consumer sentiment, which is closely linked to employment and wages. Access to capital is also important, so interest rates and lending standards influence the rate at which consumers purchase leisure products. The leisure service sector is also undergoing significant structural shifts resulting from technology applications. Leisure companies are able to engage with its customers faster and easier through online and mobile channels, which has been a positive driver for the industry. Consumer discretionary analysts are forecasting for the entire industry, a positive double-digit growth of 15.90% in the upcoming year , and a whopping growth of 46.70% over the next couple of years. the growth rate of the US stock market as a whole. Should your portfolio be overweight in the leisure sector at the moment? In this article, I’ll take you through the sector growth expectations, and also determine whether Monarch Casino & Resort is a laggard or leader relative to its consumer discretionary sector peers.

See our latest analysis for Monarch Casino & Resort

What’s the catalyst for Monarch Casino & Resort's sector growth?

Although there is higher competition for consumer leisure time, due to the rise of new activities such as online streaming and mobile games, the whole industry has been expanding in various channels to better interact with its consumer. Traditional incumbents are forced to adapt or fall behind. Over the past year, the industry saw growth in the teens, beating the US market growth of 14.15%. Monarch Casino & Resort lags the pack with its lower growth rate of 11.33% over the past year, which indicates the company has been growing at a slower pace than its leisure products. peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 28.49% in the upcoming year. This future growth may make Monarch Casino & Resort a more expensive stock relative to its peers.

Is Monarch Casino & Resort and the sector relatively cheap?

The leisure sector's PE is currently hovering around 21.53x, relatively similar to the rest of the US stock market PE of 18.18x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 13.20% on equities compared to the market’s 11.39%. On the stock-level, Monarch Casino & Resort is trading at a higher PE ratio of 28.08x, making it more expensive than the average leisure products. stock. In terms of returns, Monarch Casino & Resort generated 10.48% in the past year, which is 2.72% below the leisure products. sector.

Next Steps:

Monarch Casino & Resort’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this higher growth prospect is also reflected in the company’s price, suggested by its higher PE ratio relative to its peers. If Monarch Casino & Resort has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other leisure companies. However, before you make a decision on the stock, I suggest you look at Monarch Casino & Resort's fundamentals in order to build a holistic investment thesis.

1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
2. Historical Track Record: What has MCRI's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Monarch Casino & Resort? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.