Why Pushing a Few Chips Onto Monarch Casino & Resort Could Be Risky Short-Term, Profitable Long-Term
Monarch Casino & Resort is a family-owned casino company with a $1.15 billion market cap. The company is experiencing a growth trajectory in its latest results. However, the delta variant is one potential landmine lurking in the company's balance sheet.
Monarch is a family-owned business with two casinos in Colorado and Nevada. Its revenue has increased by 544.8% since the second quarter of 2020. The company's diluted earnings per share rose 86% year over year. It has about $28.3 million in cash on hand for any investment opportunities. It's been trading above the S&P 500 since early 2017. Before the recent dip, its returns were over 212%. The current share price is 174.6%. It is about double the average return of the stock market.
There are more people leaving California than moving there for the first time since 1995. Colorado and Nevada are popular destination states. Tech jobs and a lower cost of living are luring people to Colorado. Baby boomers are retiring and spending more on gambling than millennials. Monarch's casinos are located in both states and are profitable. They are expanding poker and blackjack facilities. The Black Hawk City Council gave permission for casinos to operate these card games.
Monarch Casino & Resort is a risky investment because of the current ratio of 0.61. The casino paid off $22.5 million of its loans early during Q2. It owes nothing on its $70 million revolving credit facility. Its total debt-to-equity ratio is 36.6. Caesars Entertainment's ratio to equity is 2.62. It is theoretically better able to cover its current debts. However, it is less profitable than some of bigger rivals.
Monarch's short-term debt might be a concern, but it's unlikely to have a nationwide lockdown. The company's successful performance, expansion of its facilities, easing of local gambling laws and the surge of baby boomers and affluent millennials into its home states are all catalysts for long- term growth.