Looking at Melco Resorts & Entertainment Limited’s (NASDAQ:MLCO) fundamentals some investors are wondering if its last closing price of $31.23 represents a good value for money for this high growth stock. Below I will be talking through a basic metric which will help answer this question. View our latest analysis for Melco Resorts & Entertainment
Can we expect MLCO to keep growing?Melco Resorts & Entertainment is poised for extremely high earnings growth in the near future. The consensus forecast from 16 analysts is extremely positive with earnings per share estimated to rise from today’s level of $0.797 to $2.088 over the next three years. This results in an annual growth rate of 19.12%, on average, which illustrates a highly optimistic outlook in the near term.
Is MLCO available at a good price after accounting for its growth?
Melco Resorts & Entertainment is trading at price-to-earnings (PE) ratio of 39.18x, this tells us the stock is overvalued compared to the US market average ratio of 18.29x , and overvalued based on current earnings compared to the hospitality industry average of 22.94x .
We already know that MLCO appears to be overvalued when compared to its industry average. But, seeing as Melco Resorts & Entertainment is perceived as a high-growth stock, we must also account for its earnings growth, which is captured in the PEG ratio. A PE ratio of 39.18x and expected year-on-year earnings growth of 19.12% give Melco Resorts & Entertainment a quite high PEG ratio of 2.05x. This means that, when we account for Melco Resorts & Entertainment’s growth, the stock can be viewed as overvalued , based on its fundamentals.
What this means for you:
MLCO’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:
- Financial Health: Is MLCO’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Past Track Record: Has MLCO been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of MLCO’s historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.