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Melco Crown Entertainment Ltd Stock Buy Recommendation Reiterated (MPEL)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK (TheStreet) -- Melco Crown Entertainment (Nasdaq:MPEL) has been reiterated by TheStreet Ratings as a buy with a ratings score of B. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, increase in net income, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins.

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Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 2.7%. Since the same quarter one year prior, revenues slightly increased by 9.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • Compared to its closing price of one year ago, MPEL's share price has jumped by 69.78%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MPEL should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry average. The net income increased by 0.4% when compared to the same quarter one year prior, going from $107.55 million to $107.98 million.
  • MELCO CROWN ENTMT LTD reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MELCO CROWN ENTMT LTD increased its bottom line by earning $0.76 versus $0.54 in the prior year. This year, the market expects an improvement in earnings ($0.96 versus $0.76).
  • MPEL's debt-to-equity ratio of 0.94 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that MPEL's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.57 is high and demonstrates strong liquidity.

Melco Crown Entertainment Limited, through its subsidiaries, engages in the development, ownership, and operation of casino gaming and entertainment resort facilities primarily in Macau. Melco Crown Entertainment has a market cap of $12.0 billion and is part of the services sector and leisure industry. The company has a P/E ratio of 40.00, above the S&P 500 P/E ratio of 18.00. Shares are up 29.9% year to date as of the close of trading on Friday.

You can view the full Melco Crown Entertainment Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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