* Ever wondered if Caesars Entertainment could be a hidden bargain or a value trap? Let's dig into what really matters for investors who care about getting the right price.
* Shares have swung a bit lately, jumping 7.8% this week, even though they are still down 34.6% year-to-date and have dropped more than 40% in the past year.
* Recently, Caesars has made headlines with new property launches and high-profile partnerships in Las Vegas, sparking chatter about fresh growth drivers for the business. These moves help explain some of the recent volatility as investors re-evaluate what is next for the company.
* When it comes to the numbers, Caesars earns a 5/6 valuation score, meaning it is considered undervalued by five out of the six key checks we use. We will break down how that score is calculated with several valuation methods in a moment and, even better, show you a smarter way to think about what the company is really worth.
Find out why Caesars Entertainment's -43.3% return over the last year is lagging behind its peers.
Approach 1: Caesars Entertainment Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow (DCF) model works by estimating all the cash Caesars Entertainment is expected to generate in the future, then calculating what that stream of cash is worth in today's dollars. This method gives investors a clearer sense of the business's real worth, based on projected performance rather than just current profits or market sentiment.
Currently, Caesars generates free cash flow of about $145.9 million (last twelve months). Analyst projections suggest a strong growth trend, with expected annual free cash flow rising to just over $1.1 billion by 2027. Beyond the next few years, cash flow estimates rely on a mix of analyst consensus and extrapolation. Simply Wall St extends the projections for an additional five years, with free cash flow expected to reach nearly $1.7 billion by 2035. All estimates are reported in US dollars.
The DCF model produces an intrinsic value of $64.63 per share, which implies the stock is trading at a 67.0% discount to its estimated value. In other words, the share price looks significantly undervalued according to this approach.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Caesars Entertainment is undervalued by 67.0%. Track this in your watchlist or portfolio, or discover 927 more undervalued stocks based on cash flows.
Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Caesars Entertainment.
Approach 2: Caesars Entertainment Price vs Sales
For companies like Caesars Entertainment that are currently reporting net losses, the Price-to-Sales (P/S) ratio becomes a more telling valuation tool compared to metrics like Price-to-Earnings. The P/S ratio focuses on the company's top-line revenue and offers investors a snapshot of how much they are paying for each dollar of sales, regardless of current profitability. This approach helps level the playing field when profits are slim or negative and growth prospects remain robust.