Is MGM Resorts Undervalued?

MGM Resorts (NYSE:MGM) is the largest resort operator on the Las Vegas strip. It represents approximately 25% of all units in the market. MGM stock fell 2.47% on May 7. Shares have dropped 7% over the past month.

The company released its first-quarter results on April 29. Consolidated net revenues rose 13% from the prior year to $3.2 billion and consolidated adjusted EBITDA climbed 5% to $740 million. Adjusted earnings missed analyst estimates and came in at $0.12 per share. This was a sharp drop from $0.34 per share in adjusted profit posted in the prior year.

MGM China had a robust quarter and looks poised to power growth going forward. Net revenues increased 23% year-over-year to $734 million.

The opening of MGM Cotai generated 23% growth in Main floor table game wins. Adjusted property EBITDA at MGM China rose 26% to $191 million.

MGM Resorts is currently trading at the low end of its 52-week range. Its forward P/E of 11 puts it in pricey territory relative to industry competitors. However, its trajectory into 2020 looks promising as it executes on its global strategy. The stock also offers a quarterly dividend of $0.13 per share which represents a modest 1.9% yield.

MGM Resorts stock had an RSI of 33 as of close on May 7. This puts the stock close to technically oversold territory. Robust US growth is good news for casinos and MGM Resorts is a discounted option for investors in early May.