Strong On High Volume: MGM Resorts International (MGM)

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.

Trade-Ideas LLC identified MGM Resorts International ( MGM) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified MGM Resorts International as such a stock due to the following factors:

  • MGM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $160.4 million.
  • MGM has traded 1.8 million shares today.
  • MGM is trading at 4.27 times the normal volume for the stock at this time of day.
  • MGM is trading at a new high 3.04% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on MGM:

MGM Resorts International, through its subsidiaries, owns and/or operates casino resorts. It operates through two segments, Wholly Owned Domestic Resorts and MGM China. The company's casino resorts offer gaming, hotel, convention, dining, entertainment, retail, and other resort amenities. Currently there are 11 analysts that rate MGM Resorts International a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for MGM Resorts International has been 12.6 million shares per day over the past 30 days. MGM Resorts International has a market cap of $11.1 billion and is part of the services sector and leisure industry. The stock has a beta of 1.22 and a short float of 6.1% with 3.09 days to cover. Shares are down 7.8% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates MGM Resorts International as a hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • MGM RESORTS INTERNATIONAL reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, MGM RESORTS INTERNATIONAL continued to lose money by earning -$0.33 versus -$0.35 in the prior year. This year, the market expects an improvement in earnings ($0.51 versus -$0.33).
  • 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 65.5% when compared to the same quarter one year prior, rising from $102.65 million to $169.85 million.
  • 37.74% is the gross profit margin for MGM RESORTS INTERNATIONAL which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 7.28% trails the industry average.
  • Net operating cash flow has decreased to $175.65 million or 39.59% 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.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, MGM RESORTS INTERNATIONAL's return on equity significantly trails that of both the industry average and the S&P 500.

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