Long-established in the Travel & Leisure industry, Wynn Resorts Ltd (WYNN, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 2.34%, juxtaposed with a three-month change of 24.06%. Fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Wynn Resorts Ltd.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 4/10
- Profitability rank: 6/10
- Growth rank: 2/10
- GF Value rank: 10/10
- Momentum rank: 5/10
Based on the above method, GuruFocus assigned Wynn Resorts Ltd a GF Score of 69 out of 100, which signals poor future outperformance potential.
Understanding Wynn Resorts Ltd's Business
Wynn Resorts Ltd operates luxury casinos and resorts. Founded in 2002 by Steve Wynn, the former CEO, the company boasts four megaresorts: Wynn Macau and Encore in Macao, and Wynn Las Vegas and Encore in Las Vegas. The Cotai Palace opened in August 2016 in Macao, and Encore Boston Harbor in Massachusetts opened in June 2019. A new building next to its existing Wynn Palace resort is expected around 2028. Wynn Resorts also operates Wynn Interactive, a digital sports betting and iGaming platform. In 2019, before the pandemic, the company derived 76% of its EBITDA from Macao and 24% from Las Vegas. With a market cap of $11.66 billion and sales of $6.53 billion, Wynn Resorts Ltd's operating margin stands at 14.46%.
Financial Strength Breakdown
Wynn Resorts Ltd's financial strength indicators present some concerning insights about the company's balance sheet health. The interest coverage ratio of 1.26 positions it worse than 80.17% of 595 companies in the Travel & Leisure industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five.
The company's Altman Z-Score is just 1.02, which is below the distress zone of 1.81, suggesting that the company may face financial distress over the next few years. Moreover, the low cash-to-debt ratio at 0.27 indicates a struggle in handling existing debt levels. The debt-to-Ebitda ratio is 7.78, which is above Joel Tillinghast's warning level of 4 and is worse than 78.39% of 620 companies in the Travel & Leisure industry, potentially signaling a red flag unless tangible assets cover the debt.
Growth Prospects
A lack of significant growth is another area where Wynn Resorts Ltd seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by an average of 18.8% per year over the past three years, which underperforms worse than 80.94% of 766 companies in the Travel & Leisure industry. Stagnating revenues may pose concerns in a fast-evolving market. Lastly, Wynn Resorts Ltd's predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Next Steps
Considering Wynn Resorts Ltd's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. The company's challenges in managing debt, coupled with its lackluster growth prospects, paint a picture of a business that may struggle to replicate its past successes. Investors should weigh these factors carefully when considering Wynn Resorts Ltd as part of their portfolio. For those seeking more robust investment opportunities, GuruFocus Premium members can explore companies with strong GF Scores using the following screener link: GF Score Screen.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
