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Trade-Ideas: MGM Resorts International (MGM) Is Today's "Barbarian At The Gate" Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified MGM Resorts International (MGM) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified MGM Resorts International as such a stock due to the following factors:

  • MGM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $164.1 million.
  • MGM has traded 253,955 shares today.
  • MGM traded in a range 208.4% of the normal price range with a price range of $0.89.
  • MGM traded above its daily resistance level (quality: 531 days, meaning that the stock is crossing a resistance level set by the last 531 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock s movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on MGM:

MGM Resorts International, through its wholly owned subsidiaries, owns and/or operates casino resorts. The company operates in two segments, Wholly Owned Domestic Resorts and MGM China. Its resorts offer gaming, hotel, convention, dining, entertainment, retail, and other resort amenities. Currently there are 11 analysts that rate MGM Resorts International a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for MGM Resorts International has been 8.4 million shares per day over the past 30 days. MGM Resorts International has a market cap of $9.9 billion and is part of the services sector and leisure industry. The stock has a beta of 2.18 and a short float of 5.2% with 2.56 days to cover. Shares are up 73% year to date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates MGM Resorts International as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and increase in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:

  • MGM's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 6.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 36.66% and other important driving factors, this stock has surged by 80.82% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • MGM RESORTS INTERNATIONAL has improved earnings per share by 36.7% in the most recent quarter compared to the same quarter a year ago. 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, MGM RESORTS INTERNATIONAL swung to a loss, reporting -$3.61 versus $5.56 in the prior year. This year, the market expects an improvement in earnings ($0.01 versus -$3.61).
  • The debt-to-equity ratio is very high at 3.06 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, MGM maintains a poor quick ratio of 0.87, which illustrates the inability to avoid short-term cash problems.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, MGM RESORTS INTERNATIONAL's return on equity significantly trails that of both the industry average and the S&P 500.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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