MGM Resorts International (MGM)

Conclusion

MGM Resorts International operates casino resorts and entertainment venues on the Las Vegas Strip, in US regional markets and in China, and runs online gaming through BetMGM. At 32.91 USD on 9 November 2026, the company has a market capitalisation of 8.33 billion USD and an enterprise value of 35.35 billion USD.

The verdict is undervalued. The P/E of 11.99 is below its historical median of 15.82, the EV/EBITDA of 15.73 is below 17.15, and the P/FCF of 5.28 is below 9.75. The discounted cash flow gives 83.06 USD per share at a discount rate of 11.52%. The fair value band runs from 51.44 to 77.16 USD with a midpoint of 64.30 USD, a margin of safety of 95.4% at the current price. The fair value from historical multiples is 45.54 USD. The reverse DCF implies revenue growth of -8.2% a year, while revenue actually grew at a five-year CAGR of 29.0% and a three-year CAGR of 10.1%.

What supports the case is the cash generation: free cash flow conversion is 2.27 on a trailing basis, and the share count has fallen at a five-year CAGR of -11.7%. The Beneish M-score of -2.79 is in the unlikely range. What could break it is the balance sheet and returns. Net debt to EBITDA is 12.02, interest coverage is 2.80 and the Altman Z-score is 0.789. ROIC of 3.9% is below WACC of 6.4%, and analysts have cut next-year estimates by 32.3% over 90 days.

Financial health

Financial strength is red, held back by the leverage and coverage figures and supported only by the current ratio of 1.24. Net debt to EBITDA of 12.02 and interest coverage of 2.80 are both assessed as bad, and the company's debt to equity ratio stands at 11.75. The quick ratio is 1.02. The Altman Z-score of 0.789 falls in the distress zone, although the Altman model was designed for manufacturers and this company is not one. Insolvency risk: medium, about 6% by the estimate of the Ohlson model over one to two years. Financial debt has fallen 7.2% a year over five years, measured on annual revenue growth. The company's interest expense is not reported in the inputs, so the balance sheet cannot be assessed in full.

Earnings quality

Earnings quality is green. Free cash flow conversion is 2.27 on a trailing basis and 1.35 over five years, and the accrual ratio of -0.0605 points to cash earnings exceeding reported earnings. Stock-based compensation is 0.55% of revenue, leaving free cash flow after SBC at 1.48 billion USD. The share count has fallen at a five-year CAGR of -11.7%. The Piotroski score is 6 out of 9 and the Beneish M-score of -2.79 is in the unlikely range. The company beat estimates in 5 of the last 8 quarters, with an average surprise of 15.3%. Estimates are being cut: the current-year estimate has fallen 20.9% over 90 days with 9 downgrades and no upgrades in the last 30 days, and the next-year estimate has fallen 32.3% over 90 days.

Profitability

Profitability is red. The gross margin of 43.6% is close to its historical median of 43.5%, but the operating margin of 7.0% is well below its median of 12.1%, and the net margin of 3.9% is below its median of 9.1%. Operating margin stability is 0.876. ROIC of 3.9% is below WACC of 6.4%, a gap the inputs record as a negative ROIC minus WACC of -2.5%, and the five-year median ROIC is 4.8%. Return on equity of 27.7% is inflated by leverage. The DuPont split for 2025 shows a net margin of 1.18%, an asset turnover of 0.42 and an equity multiplier of 17.03, so the high return comes from borrowing rather than from operations.

Growth

Growth is red, as revenue has compounded strongly but earnings have not. Revenue grew at a CAGR of 29.0% over five years, 10.1% over three years and 6.7% over ten years. Revenue rose in 9 of the last 10 comparable years. Earnings per share fell at a three-year CAGR of -39.8%, while free cash flow per share rose at a three-year CAGR of 37.4%. Next year's EPS estimate points to a decline of 5.9%. The gap between the strong revenue record and the falling earnings estimates is the central question for the growth outlook.

Valuation

Valuation is green. The P/E of 11.99 is at a discount of 24.2% to its historical median of 15.82, the EV/EBITDA of 15.73 is at a discount of 8.3% to 17.15, and the P/FCF of 5.28 is at a discount of 45.8% to 9.75. The DCF gives 83.06 USD per share with a discount rate of 11.52%, a near-term growth of 6.7% and a terminal growth of 2.5%. The fair value band runs from 51.44 to 77.16 USD with a midpoint of 64.30 USD. These are model outputs built on fixed assumptions, including a 5% equity risk premium and capped growth, and they are not a price target. The reverse DCF implies growth of -8.2%, against revenue growth of 29.0% over five years. The company pays no dividend.

Risks

The main risk is leverage. Net debt to EBITDA of 12.02 and interest coverage of 2.80 leave little room if operating profit falls further, and a weaker cash flow would raise the pressure on debt service. Returns below the cost of capital mean that growth in revenue does not currently create value. Falling estimates for both the current and the next year suggest that analysts expect weaker earnings, which would reduce the cash flow the valuation depends on. The DCF rests on a terminal value that accounts for 45.6% of its value. The analysis has limits: the inputs contain no debt maturity schedule and no revenue by segment, the interest expense is not reported, and the historical multiples are based on five data points.