MGM 43.5 (-0.62%)
US5529531015Travel & LeisureResorts & Casinos

Last update on 2024-06-06

MGM Resorts (MGM) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Analyzing MGM Resorts' Piotroski F-Score for 2023: 5/9. Insights into profitability, liquidity, and efficiency of MGM. Comprehensive stock analysis.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 5

We're running MGM Resorts (MGM) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
0
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
0
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

MGM Resorts was evaluated using the Piotroski F-Score by analyzing profitability, liquidity, and operating efficiency, receiving a score of 5 out of 9. For profitability, MGM scored well by reporting a positive net income of over $1 billion and a positive cash flow from operations exceeding $2.6 billion for 2023. However, the Return on Assets (ROA) decreased, resulting in no points for that criterion. The company's operating cash flow also surpassed its net income, giving it another good mark. In terms of liquidity and financial stability, MGM's leverage has increased, indicating more debt, and its current ratio decreased, raising concerns about short-term liquidity. Positively, the number of shares outstanding was reduced significantly, suggesting share buybacks. For operational efficiency, although the company's gross margin decreased, its asset turnover ratio improved, indicating better efficiency in using assets to generate revenue.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 5 out of 9, MGM Resorts has shown a mix of strengths and weaknesses. The positive net income, strong cash flow from operations, and improved asset turnover are positive signs. However, decreasing ROA, increasing leverage, and declining gross margin raise some concerns. Given these mixed indicators, further investigation into MGM Resorts is recommended before making an investment decision. It might be worth considering for investors focusing on operational resilience and cash flow generation but paying attention to rising debt levels and liquidity issues.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of MGM Resorts (MGM)

Company has a positive net income?

Net income is one of the most crucial indicators of a company's profitability. It shows the net profit a firm has made after accounting for all expenses, taxes, and costs of goods sold.

Historical Net Income of MGM Resorts (MGM)

MGM Resorts has reported a net income of $1,142,180,000 for the year 2023. This marks a substantial positive outcome and adds 1 point in the Piotroski analysis score. Moreover, over the last 20 years, MGM has seen several fluctuations, including negative net incomes in 2008 (-$855,286,000), 2009 (-$1,291,682,000), and 2010 (-$1,437,397,000). However, the trend since 2015 has generally been positive, indicating a possibly more stable and profitable period for MGM Resorts despite the volatility in earlier years. The substantial positive figure for 2023 is indicative of sound financial health, reinforced by the recovery from the net loss seen in the 2020 pandemic year (-$1,032,724,000). This data highlights the resilience and improving profitability of MGM Resorts.

Company has a positive cash flow?

This criterion examines whether the company's Cash Flow from Operations (CFO) is positive or negative, providing insight into the firm's ability to generate cash flow from its core business activities.

Historical Operating Cash Flow of MGM Resorts (MGM)

The Cash Flow from Operations (CFO) for MGM Resorts in 2023 is $2,690,777,000, which is positive. This is a favorable indicator as it suggests that the company is capable of generating substantial cash from its core operational activities. Over the past 20 years, MGM Resorts has shown varying levels of CFO, with a significant dip into negative territory in 2020 (-$1,493,043,000) attributable to the COVID-19 pandemic's effect on the hospitality and gaming industries. However, the steady recovery to a positive CFO of $2,690,777,000 in 2023 underscores robust operational resilience and effective management. Consequently, MGM Resorts earns a point in this criterion, reflecting strong operational health and cash generation capability.

Return on Assets (ROA) are growing?

The criterion evaluates the change in Return on Assets (ROA) from one year to the next. An increasing ROA indicates improved profitability relative to assets.

Historical change in Return on Assets (ROA) of MGM Resorts (MGM)

The ROA for MGM Resorts (MGM) decreased from 0.034 in 2022 to 0.0259 in 2023. This decrease results in 0 points for this criterion. Comparing these values, it can be seen that the company's ROA has diminished, indicating a drop in how effectively the company turned its assets into profitability. Furthermore, when viewed against the industry median ROA, which stands at around 0.4982 for 2023, MGM Resorts is underperforming relative to its peers. Over the last 20 years, the industry median has generally hovered higher compared to MGM's ROA, suggesting a persistent lag behind industry norms.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income compares the company's cash-generating ability to its profitability, highlighting quality of earnings.

Historical accruals of MGM Resorts (MGM)

In 2023, MGM Resorts' operating cash flow stood at $2,690,777,000 compared to its net income of $1,142,180,000. This positive disparity indicates strong cash flow generation relative to accounted profits, thereby earning a score of 1 point. Historically, MGM has experienced fluctuations in both metrics: for example, during the 2008 financial crisis, net income was significantly negative (-$855,286,000), whereas operating cash flow, though diminished, remained positive ($753,032,000). Such analysis underscores resilience in cash-flow generation even amid losses, crucial for sustaining operations and long-term viability.

Liquidity of MGM Resorts (MGM)

Leverage is declining?

Change in leverage refers to how much of a company's assets are financed by debt. It's a crucial metric to evaluate a company's financial risk and stability over time.

Historical leverage of MGM Resorts (MGM)

MGM Resorts' leverage ratio has increased from 0.7131 in 2022 to 0.7428 in 2023, indicating a rise in debt levels relative to equity. A higher leverage ratio suggests the company is taking on more debt, which can increase financial risk. From a long-term perspective, the current leverage ratio of 0.7428 is substantially higher compared to historical levels, such as 0.5156 in 2003 and 0.4373 in 2017. This increase may reflect strategic investments or expansions but also raises potential concerns about increased debt servicing costs, especially in a higher interest rate environment.

Current Ratio is growing?

Current Ratio evaluates a company's ability to pay short-term obligations with its current assets. Higher ratios indicate better liquidity.

Historical Current Ratio of MGM Resorts (MGM)

Comparing MGM Resorts' Current Ratio of 1.5709 in 2023 with 1.8058 in 2022 reveals a decrease. This is a negative trend, suggesting weakened liquidity. Despite MGM's ratio historically surpassing the industry median, the declining ratio could pose a risk in meeting short-term liabilities.

Number of shares not diluted?

Change in Shares Outstanding measures whether a company has increased or decreased the number of its shares over a period. Decreasing shares outstanding can be a positive indicator that the company is buying back its stock, which may suggest strong financial health and confidence in future performance.

Historical outstanding shares of MGM Resorts (MGM)

Upon examining the data, MGM Resorts had 409,201,000 outstanding shares in 2022 and 354,926,000 shares in 2023, indicating a decrease. This translates to a reduction of 54,275,000 shares or approximately 13.26%. Over the last 20 years, the number of outstanding shares has fluctuated, with a notable peak in 2010 at 560,895,000 shares. This drop in 2023 adds 1 point to Piotroski's analysis for MGM, confirming a positive trend in share buybacks. Such moves commonly suggest that management is confident about the company's future profitability and aims to provide more value to shareholders by reducing supply, potentially increasing earnings per share.

Operating of MGM Resorts (MGM)

Cross Margin is growing?

Gross margin is calculated as gross profit divided by total revenue and represents the percentage of total sales revenue that a company retains after incurring the direct costs associated with producing the goods and services it sells.

Historical gross margin of MGM Resorts (MGM)

Comparing MGM's gross margin in 2023 (0.4708) to that in 2022 (0.4932), it's evident that there has been a decrease in the gross margin. This trend is mildly concerning as gross margin is a critical indicator of profitability, efficiency, and cost management. MGM Resorts' gross margin declined by approximately 0.0224 points, contrasting with the 2023 industry median gross margin of 0.4982, which has seen an upward trend compared to the prior year (0.497). The downward trend in gross margin implies that MGM might have faced higher production costs or couldn't increase prices proportionally to maintain its previous gross margin levels. Given the competitive landscape, a declining gross margin while the industry median is improving can put MGM at a relative disadvantage. For this criterion, MGM Resorts (MGM) scores 0 points.

Asset Turnover Ratio is growing?

Asset Turnover measures the efficiency of a company's use of its assets to generate sales revenue.

Historical asset turnover ratio of MGM Resorts (MGM)

The Asset Turnover ratio for MGM Resorts increased from 0.3032 in 2022 to 0.3671 in 2023. This improvement signifies that MGM Resorts has become more efficient in utilizing its assets to generate revenue. This trend is a positive indicator for both operational effectiveness and profitability. Looking at the historical data, MGM's Asset Turnover shows a cyclical pattern with various peaks and troughs over the last 20 years, reaching its highest value in 2019 at 0.4041. The recent improvement suggests a recovery phase, likely influenced by increased post-pandemic travel and leisure activities. This consistency and recent trend amplify investor confidence, rendering this criterion favorable. Thus, we assign a point to Asset Turnover.


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