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Perilous Reversal Watch: Caesars Entertainment (CZR)

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 Caesars Entertainment ( CZR) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Caesars Entertainment as such a stock due to the following factors:

  • CZR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $21.4 million.
  • CZR has traded 634,470 shares today.
  • CZR is down 3% today.
  • CZR was up 8.6% yesterday.

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More details on CZR:

Caesars Entertainment Corporation owns, operates, or manages casino entertainment facilities. Its casino entertainment facilities include land-based casinos, riverboat or dockside casinos, and managed casinos, as well as casinos combined with a thoroughbred racetrack and a harness racetrack. Currently there are no analysts that rate Caesars Entertainment a buy, 3 analysts rate it a sell, and 1 rates it a hold.

The average volume for Caesars Entertainment has been 905,900 shares per day over the past 30 days. Caesars Entertainment has a market cap of $1.8 billion and is part of the services sector and leisure industry. The stock has a beta of 0.78 and a short float of 19.9% with 7.26 days to cover. Shares are down 35.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Caesars Entertainment as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 77.6% when compared to the same quarter one year ago, falling from -$217.60 million to -$386.40 million.
  • Net operating cash flow has significantly decreased to -$94.50 million or 104.54% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • In its most recent trading session, CZR has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • CAESARS ENTERTAINMENT CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CAESARS ENTERTAINMENT CORP reported poor results of -$22.05 versus -$11.12 in the prior year. This year, the market expects an improvement in earnings (-$4.70 versus -$22.05).
  • 49.11% is the gross profit margin for CAESARS ENTERTAINMENT CORP which we consider to be strong. Regardless of CZR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CZR's net profit margin of -18.38% significantly underperformed when compared to the industry average.

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