Wynn Resorts Ltd (WYNN, Financial) has recently seen a daily gain of 2.78%, although its 3-month performance shows a loss of 5.95%. With a reported Loss Per Share of 2.14, the question arises, is the stock modestly undervalued? This article aims to provide a comprehensive valuation analysis of Wynn Resorts (WYNN), exploring its intrinsic value, financial strength, profitability, and growth.
Company Introduction
Founded in 2002 by Steve Wynn, Wynn Resorts operates luxury casinos and resorts. The company runs four megaresorts: Wynn Macau and Encore in Macau, and Wynn Las Vegas and Encore in Las Vegas. With 76% and 24% of its 2019 prepandemic EBITDA coming from Macau and Las Vegas, respectively, Wynn Resorts is a significant player in the luxury casino and resort industry. Currently, the company is trading at $104.37 per share with a market cap of $11.90 billion, which is below the estimated GF Value of $127.89.
Understanding GF Value
The GF Value is a proprietary measure that provides an estimate of a stock's fair value. It is calculated based on historical multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at.
According to GuruFocus Value calculation, Wynn Resorts (WYNN, Financial) appears to be modestly undervalued. Given this valuation, the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Investing in companies with sound financial strength minimizes the risk of permanent loss. The financial strength of a company can be gauged by looking at the cash-to-debt ratio and interest coverage. Wynn Resorts has a cash-to-debt ratio of 0.28, which is lower than 61.59% of companies in the Travel & Leisure industry. This results in an overall financial strength rating of 3 out of 10, indicating that the financial strength of Wynn Resorts is relatively poor.
Profitability and Growth
Investing in profitable companies is less risky, especially if they have consistently demonstrated profitability over the long term. Wynn Resorts has been profitable 7 years over the past 10 years. However, its operating margin of 1.22% is worse than 63.04% of companies in the Travel & Leisure industry. Overall, GuruFocus ranks Wynn Resorts's profitability as fair.
Growth is a significant factor in the valuation of a company. Wynn Resorts has a 3-year average annual revenue growth of -18.8%, which ranks worse than 78.07% of companies in the Travel & Leisure industry. The 3-year average EBITDA growth rate is -26.5%, which ranks worse than 83.11% of companies in the Travel & Leisure industry.
ROIC vs WACC
Comparing the return on invested capital (ROIC) to the weighted average cost of capital (WACC) can provide insights into a company's profitability. Wynn Resorts's ROIC is 0.51, and its cost of capital is 8.96 for the past 12 months, indicating that the company is not creating value for shareholders.
Conclusion
In conclusion, Wynn Resorts (WYNN, Financial) appears to be modestly undervalued. Despite its poor financial condition and fair profitability, the company's growth ranks worse than 83.11% of companies in the Travel & Leisure industry. To learn more about Wynn Resorts stock, you can check out its 30-Year Financials here.
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