Wynn Resorts has had a difficult run over the past year, and the latest moves in its balance sheet now put the focus squarely on what investors are paying for its earnings. With the share price under pressure, the key issue is whether the current valuation lines up with the profit power of the business.
- The stock has fallen 36.5% over the past year, which puts extra scrutiny on whether the current earnings justify where the market is pricing Wynn Resorts today.
- The group has issued US$900 million of 6.875% senior notes due 2035 to refinance lower coupon debt and support projects such as the US$5.7b Wynn Al Maha development, which can influence future interest costs and the timing of cash generation that feeds into earnings.
- The analysts covering Wynn Resorts have run their own numbers. See what analysts think Wynn Resorts's shares could be worth.
The issue now is whether Wynn Resorts' current share price fairly reflects the earnings that the business is generating today.
If you want a broader starting point while you weigh Wynn Resorts' earnings profile and recent refinancing, you can run the same question across 31 high quality undervalued stocks.
Where Does Wynn Resorts Sit on Earnings?
The P/E ratio works well for Wynn Resorts because earnings are a key driver of how investors weigh a mature hospitality operator with large existing assets. Wynn Resorts currently trades on a P/E of 18.3x, which is slightly above its peer average of 16.7x and a touch below the broader Hospitality sector on 19.9x. That puts the stock in a band where the market is neither paying a rock bottom price for its profits nor attaching an extreme premium to them.
Because recent refinancing lifted interest costs and pushed out debt maturities, the market is valuing Wynn Resorts at a P/E that sits close to what a tailored model would suggest given its risk profile and earnings power. The current multiple is just under that modelled level, which points to a valuation that is about right rather than clearly cheap or expensive. Despite the new US$900 million senior notes reshaping the balance sheet, the stock is still being priced at roughly the earnings multiple you would expect for a large resort operator in this sector. Explore the numbers behind Wynn Resorts's P/E valuation.
The Wynn Resorts Narrative: What Would Justify Today's Price?
Narratives pick up where Wynn Resorts' P/E puzzle leaves off by spelling out which paths for future growth, profitability and earnings would need to hold for the stock to be worth materially more or less than today's price, and they sit on Simply Wall St's Community page. Each one frames Wynn Resorts' fair value as a thesis about how the business might evolve that you can track over time rather than a static snapshot.
One of the top community narratives on Wynn Resorts: 39% undervalued
"The imminent launch of Wynn Al Marjan Island, with first-mover advantage and limited near-term competition in a potentially multi-billion-dollar new market..."
Discover why this Narrative puts Wynn Resorts at 39% undervalued.
One more Wynn Resorts check that belongs next to the price tag
The numbers only tell part of the story for Wynn Resorts, because the people setting priorities and the way they are rewarded can tilt long term outcomes in powerful ways. See who runs Wynn Resorts and how they are paid.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com