NEW YORK (TheStreet) -- With "the fight of the century" over the weekend, and MGM Resorts International (MGM) reporting earnings yesterday, and Caesar's Entertainment (CZR) reporting tomorrow, we decided to check TheStreet Ratings to find good casino stocks to invest in.
Part of the reason casinos have been struggling is due to the economy. Many folks haven't had much disposable income and, therefore, they have been less willing to "let it ride." As the recovery continues and people have some extra cash to burn, some of them are hitting the gaming tables.
Even with Atlantic City recently flirting with bankruptcy, there are still some casinos investors can gamble on that have better odds than the roulette table.
So what are the best casinos investors should be buying? Here are the top three, according to TheStreet Ratings, TheStreet's proprietary ratings tool.
TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. 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.
Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
Check out which three casinos made the list. And when you're done be sure to read about which mid-cap oil companies to sell now. Year-to-date returns are based on May 4, 2015 closing prices. The highest-rated stock appears last -- read more to see which one is No. 1.
MCRI data by YCharts
3. Monarch Casino & Resort, Inc. (MCRI)
Rating: Buy, B
Market Cap: $316.8 million
Year-to-date return: 13.5%
Monarch Casino & Resort, Inc., through its subsidiaries, owns and operates the Atlantis Casino Resort Spa, a hotel/casino facility in Reno, Nevada; and the Monarch Casino Black Hawk in Black Hawk, Colorado.
"We rate MONARCH CASINO & RESORT INC (MCRI) a BUY. This is driven by a number of 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 revenue growth, solid stock price performance, reasonable valuation levels, increase in net income and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 7.0%. Since the same quarter one year prior, revenues slightly increased by 3.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 23.4% when compared to the same quarter one year prior, going from $3.28 million to $4.04 million.
- MONARCH CASINO & RESORT INC has improved earnings per share by 26.3% 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, MONARCH CASINO & RESORT INC reported lower earnings of $0.83 versus $1.07 in the prior year. This year, the market expects an improvement in earnings ($1.00 versus $0.83).
- You can view the full analysis from the report here: MCRI Ratings Report