NEW YORK (TheStreet) -- Melco Crown Entertainment (MPEL) shares are down 3.8% to $24.29 on Wednesday, continuing to decline following yesterday's release of another disappointing month of Macau gaming region revenues.
Gaming stocks across the board fell yesterday, following reports from the region that showed a 23% drop in total revenue to $3.51 billion during October, marking the fifth consecutive month of declining revenue in the Chinese gaming region.
The cause for the declining fortunes in the region has been connected to the Chinese government's crack down on corruption as well as a slowing a Chinese economy.
TheStreet Ratings team rates MELCO CROWN ENTMT LTD as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate MELCO CROWN ENTMT LTD (MPEL) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is somewhat low, currently at 0.68, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, MPEL has a quick ratio of 2.42, which demonstrates the ability of the company to cover short-term liquidity needs.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market on the basis of return on equity, MELCO CROWN ENTMT LTD has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- MELCO CROWN ENTMT LTD's earnings per share declined by 21.2% 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, MELCO CROWN ENTMT LTD increased its bottom line by earning $1.15 versus $0.76 in the prior year. This year, the market expects an improvement in earnings ($1.34 versus $1.15).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.8%. Since the same quarter one year prior, revenues slightly dropped by 7.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: MPEL Ratings Report