Caesars Entertainment and 10 Other Casino Stocks to Avoid in 2015

NEW YORK (TheStreet) -- Are all casino and gaming stocks poor investments? Believe it or not, there are some that are worse than others.

Last week Caesars Entertainment (CZR) filed for bankruptcy protection under Chapter 11 in a Chicago court for one of its subsidiaries -- Caesars Entertainment Operating Co., the unit that operates 44 of its gaming and resort properties in 13 states. The restructuring is intended to "significantly reduce long-term debt and annual interest payments, while providing for significant recoveries for creditors and ensuring no interruption of operations across the company's network of properties," according to a Jan. 15 release.

The gaming industry as a whole has been facing tough times. Gaming revenue coming out of Las Vegas and Atlantic City peaked in 2006 and have been dwindling ever since. Macau, which has been a source of explosive growth for gaming companies and now does seven times more business than Las Vegas, will see its first year of negative growth in 2014 since it first started collecting such numbers in 2002. 

It should be no surprise then that casino stocks are among the worst rated according to TheStreet Ratings, TheStreet's proprietary stock rating tool, which projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 30 major data points, TheStreet Ratings uses a quantitative approach to rating stocks. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

The 11 stocks on the list have "sell" ratings, with C- or worse grade from TheStreet Ratings. Here's the list.

11. Dover Downs Gaming & Entertainment (DDE)

Rating: Sell, D+

2014 Return: -43.2%

Dover Downs Gaming & Entertainment, Inc., together with its subsidiaries, operates as a gaming and entertainment resort destination in the United States.

"We rate DOVER DOWNS GAMING & ENTMT (DDE) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and poor profit margins."

You can view the full analysis from the report here: DDE Ratings Report

10. Full House Resorts (FLL)

Rating: Sell, D+

2014 Return: -51.3%

Full House Resorts, Inc. owns, develops, manages, and invests in gaming-related enterprises.

"We rate FULL HOUSE RESORTS INC (FLL) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself."

You can view the full analysis from the report here: FLL Ratings Report

9. Isle of Capri Casinos (ISLE)

Rating: Sell, D+

2014 Return: -4.7%

Isle of Capri Casinos, Inc., together with its subsidiaries, develops, owns, and operates regional gaming facilities and related dining, lodging, and entertainment facilities in the United States.

"We rate ISLE OF CAPRI CASINOS INC (ISLE) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity and feeble growth in its earnings per share."

You can view the full analysis from the report here: ISLE Ratings Report

 

8. Lakes Entertainment (LACO)

Rating: Sell, D+

2014 Return: -4.7%

Lakes Entertainment, Inc. develops, finances, manages, and owns casino properties in the United States.

"We rate LAKES ENTERTAINMENT INC (LACO) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."

You can view the full analysis from the report here: LACO Ratings Report

 


7. Scientific Games Corp. SGMS

Rating: Sell, D+

2014 Return: -6.7%

Scientific Games Corporation provides technology-based products and services, and associated content for gaming and lottery markets worldwide. The company operates in three segments: Instant Products, Lottery Systems, and Gaming.

"We rate SCIENTIFIC GAMES CORP (SGMS) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally high debt management risk, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

You can view the full analysis from the report here: SGMS Ratings Report

6. Caesars Entertainment (CZR)

Rating: Sell, D

2014 Return: -25.3%

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.

"We rate CAESARS ENTERTAINMENT CORP (CZR) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. 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."

You can view the full analysis from the report here: CZR Ratings Report

5. Entertainment Gaming Asia (EGT)

Rating: Sell, D

2014 Return: -57.2%

Entertainment Gaming Asia Inc., a gaming company, owns and leases electronic gaming machines (EGMs) in resorts, hotels, and other venues in Cambodia and the Philippines. It operates in two segments, Gaming Operations and Gaming Products.

"We rate ENTERTAINMENT GAMING ASIA (EGT) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, disappointing return on equity and weak operating cash flow."

You can view the full analysis from the report here: EGT Ratings Report

4. Iao Kun Group Holding Co. (IKGH)

Rating: Sell, D

2014 Return: -58.2%

Iao Kun Group Holding Company Limited, through its subsidiaries, promotes VIP gaming rooms in Macau, the People's Republic of China. Its VIP gaming rooms are located in City of Dreams Hotel & Casino, Sands Cotai Central, StarWorld Hotel and Casino, Galaxy Macau Resort, and Le Royal Arc Casino.

"We rate IAO KUN GROUP HOLDING CO LTD (IKGH) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."

You can view the full analysis from the report here: IKGH Ratings Report

3. Empire Resorts (NYNY)

Rating: Sell, D

2014 Return: 60.6%

Empire Resorts, Inc., through its subsidiaries, is engaged in hospitality and gaming industries in New York.

"We rate EMPIRE RESORTS INC (NYNY) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and poor profit margins."

You can view the full analysis from the report here: NYNY Ratings Report

 

 

2. Penn National Gaming (PENN)

Rating: Sell, D

2014 Return: -5.3%

Penn National Gaming, Inc., together with its subsidiaries, owns and manages gaming and pari-mutuel properties in the United States and Canada. The company is involved in gaming on slot machines and table games. It operates through three segments: Midwest, East/West, and Southern Plains.

"We rate PENN NATIONAL GAMING INC (PENN) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally high debt management risk and feeble growth in its earnings per share."

You can view the full analysis from the report here: PENN Ratings Report

1.  500.COM LTD (WBAI)

Rating: Sell, D

2014 Return: -50.2%

500.com Limited provides online sports lottery services in the People's Republic of China. It operates as an aggregator and processor of lottery purchase orders from its registered user accounts.

"We rate 500.COM LTD -ADR (WBAI) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The area that we feel has been the company's primary weakness has been its generally disappointing historical performance in the stock itself."

You can view the full analysis from the report here: WBAI Ratings Report

 

 

- Written by Laurie Kulikowski in New York.

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