Is Melco Resorts & Entertainment Limited (NASDAQ:MLCO) Potentially Undervalued?

By
Simply Wall St
Published
June 25, 2021
NasdaqGS:MLCO
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Melco Resorts & Entertainment Limited (NASDAQ:MLCO), might not be a large cap stock, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$21.33 and falling to the lows of US$16.64. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Melco Resorts & Entertainment's current trading price of US$17.02 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Melco Resorts & Entertainment’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Melco Resorts & Entertainment

What is Melco Resorts & Entertainment worth?

Great news for investors – Melco Resorts & Entertainment is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $23.24, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Melco Resorts & Entertainment’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Melco Resorts & Entertainment generate?

earnings-and-revenue-growth
NasdaqGS:MLCO Earnings and Revenue Growth June 25th 2021

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. In the upcoming year, Melco Resorts & Entertainment's earnings are expected to increase by 76%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since MLCO is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on MLCO for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy MLCO. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've found that Melco Resorts & Entertainment has 2 warning signs (1 is potentially serious!) that deserve your attention before going any further with your analysis.

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This article by Simply Wall St is general in nature. 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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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.