NEW YORK (TheStreet) -- Caesars Entertainment (CZR) shares are fluctuating in early market trading after opening at $7.55 after the company agreed to pay the federal government a $20 million fine for anti-money laundering lapses, according to Reuters.
The payment is expected to be announced sometime this week and will bring a conclusion to the joint charges brought by both the U.S. Treasury Department and Justice Department, according to the St Louis. Post-Dispatch.
The federal agencies charged that the company's sports bet booking operations failed to effectively police against wagers placed by illegal betting rings, according to sources.
In 2013, fellow gaming company Las Vegas Sands (LVS) agreed to pay $47 million to settle an anti-money laundering failure charge from the Justice Department and earlier this year the Trump Taj Mahal Casino in Atlantic City agreed to pay the Treasury Department's Financial Crimes Enforcement Network a $10 million fine for the same infraction.
TheStreet Ratings team rates CAESARS ENTERTAINMENT CORP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate CAESARS ENTERTAINMENT CORP (CZR) a HOLD. The primary factors that have impacted our rating are mixed – some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its notable return on equity, attractive valuation levels and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and generally higher debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, CAESARS ENTERTAINMENT CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for CAESARS ENTERTAINMENT CORP is rather high; currently it is at 57.44%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, CZR's net profit margin of 1.31% significantly trails the industry average.
- The debt-to-equity ratio is very high at 3.83 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, CZR's quick ratio is somewhat strong at 1.48, demonstrating the ability to handle short-term liquidity needs.
- CZR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 49.12%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full analysis from the report here: CZR Ratings Report