CZR

We rate Caesars Entertainment, Inc. (CZR) as a Reduce with a composite score of 42.6/100 at a current price of $20.40. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in value (78th percentile) and quality (47th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (28th percentile) and investment (31th percentile) tempers our overall conviction. We assign a No Moat rating (38/100), Very High uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; balance sheet deleveraging progress; the path to profitability. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Caesars Entertainment, Inc. holds a top-quartile position (#0 of 50) within the Retail Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 42.6/100 places it at rank #3178 in our full 7,333-stock universe. At $5.8B in market capitalization, Caesars Entertainment, Inc. is a mid-cap player in the Retail Trade space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 1%, though momentum at the 28th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 49% (+12.8pp vs sector) narrow to operating margins of 19% (+15.0pp vs sector) and net margins of -1.7%, yielding a gross-to-net conversion rate of -3%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $20.40, Caesars Entertainment, Inc. appears undervalued relative to its fundamentals. Our value factor score of 78/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at EV/EBITDA of 4.5x (discounted to peers), P/B of 1.2x, P/S of 0.4x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a Very High uncertainty rating to Caesars Entertainment, Inc.. The stock exhibits multiple compounding risk factors: elevated market sensitivity (beta of 1.54), significant leverage (323% debt-to-equity), current negative profitability (net margin -1.7%). The extreme uncertainty around future cash flows makes precise valuation difficult, and the range of outcomes is exceptionally wide. Only investors with high risk tolerance and extended time horizons should consider this name.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.54); significant leverage (323% debt-to-equity); current negative profitability (net margin -1.7%); below-average price stability (35th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 35th percentile and quality factor at the 47th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 49% provide a buffer against cost pressures. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate Caesars Entertainment, Inc.'s capital allocation as Poor. Key concerns include low returns on equity (-5.2%), elevated leverage (323% D/E), negative profitability, weak asset returns (ROA -0.6%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Caesars Entertainment, Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Caesars Entertainment, Inc. receives a Reduce rating with a composite score of 42.6/100 (rank #3178 of 7,333). Our quantitative framework assigns a No Moat (38/100, trend: stable), Very High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 44/100.

Our analysis does not support a constructive view on Caesars Entertainment, Inc. at this time. The combination of limited competitive advantages, very high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.