MGM

We rate MGM Resorts International (MGM) as a Reduce with a composite score of 42.4/100 at a current price of $35.05. 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 stability (51th percentile) and momentum (50th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (28th percentile) and investment (30th percentile) tempers our overall conviction. We assign a Narrow Moat rating (62/100), High uncertainty, and Poor capital allocation.

Key items to watch: balance sheet deleveraging progress. 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.

MGM Resorts International 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 42.4/100 places it at rank #3210 in our full 7,333-stock universe. At $9.4B in market capitalization, MGM Resorts International is a mid-cap player in the Retail Trade space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -2% combined with momentum at the 50th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 43% (+7.2pp vs sector) narrow to operating margins of 6% (+1.8pp vs sector) and net margins of 2.2%, yielding a gross-to-net conversion rate of 5%. 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 $35.05, MGM Resorts International is trading at a premium to fundamental value. Our value factor score of 39/100 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 premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 24.6x (roughly in line with the sector median of 21.4x), EV/EBITDA of 8.0x (near the sector median), P/B of 2.9x, P/S of 0.6x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a High uncertainty rating to MGM Resorts International. Key risk factors include elevated market sensitivity (beta of 1.37), significant leverage (191% debt-to-equity), weak quality scores (28th percentile). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.37); significant leverage (191% debt-to-equity); weak quality scores (28th percentile); the combination of leverage (191% D/E) and thin margins (2.2% net) amplifies downside risk. 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 51th percentile and quality factor at the 28th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 43% 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 MGM Resorts International's capital allocation as Poor. Key concerns include elevated leverage (191% D/E), weak asset returns (ROA 0.9%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — MGM Resorts International 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, MGM Resorts International receives a Reduce rating with a composite score of 42.4/100 (rank #3210 of 7,333). Our quantitative framework assigns a Narrow Moat (62/100, trend: stable), High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 39/100.

Our analysis does not support a constructive view on MGM Resorts International at this time. The combination of the current quantitative profile, 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.