Monarch Casino Soars 20%, Still A Buy?

Forbes

18-07-2025

CANADA - 2025/03/18: In this photo illustration, the Monarch Casino & Resort logo is seen displayed ... More on a smartphone screen. (Photo Illustration by Thomas Fuller/SOPA Images/LightRocket via Getty Images)
Monarch Casino & Resort (NASDAQ: MCRI) experienced a surge of 20% on July 17, 2025, and increased by as much as 24% in after-hours trading, significantly outperforming the S&P 500 and reaching a new 52-week peak. Although the stock is no longer inexpensive in absolute terms, it continues to trade at reasonable valuation multiples in comparison to the broader market, particularly when considering its strong growth, impressive profitability, and clean balance sheet. However, investors should remain cautious about Monarch's historical susceptibility during economic downturns, as the stock has demonstrated considerable drawdowns in previous crises. Therefore, if you are looking for upside with less volatility than individual stocks, the Trefis High Quality portfolio offers an alternative that has outperformed the S&P 500 and produced returns exceeding 91% since its launch. Additionally, check out What's Next For Hyatt's Stock?
Blowout Q2 Results Spark a Rally
Monarch reported a record adjusted EBITDA of $51.3 million in Q2 2025, marking a 16.8% increase year-over-year and exceeding consensus estimates by $12.8 million. Casino revenue grew 12.1%, fueled by strong demand and enhanced efficiency resulting from a $100 million renovation at Atlantis. Hotel revenue decreased by 3.1%, but the company compensated for it with margin expansion and strong performance in both its Atlantis and Black Hawk properties. Q2 net income increased by 19.1% to $27 million, with EPS growing by 21% to $1.44. The company also returned capital to shareholders through a $0.30 dividend and $19.8 million in stock buybacks.
Valuation: Still Reasonable
In spite of the recent rally, Monarch Casino continues to be reasonably valued relative to the S&P 500, trading at a price-to-sales ratio of 3.0 (vs. 3.1), a price-to-earnings ratio of 25.6 (vs. 26.9), and a price-to-free cash flow multiple of 17.7 (vs. 20.9). The company has also achieved stronger growth, with a three-year revenue CAGR of 7.1% exceeding the S&P 500's 5.5%, and a 3.8% rise over the past year. Profitability metrics are similarly impressive, showcasing an operating margin of 17.9% over the last four quarters, an operating cash flow margin of 26.4% (vs. 14.9%), and a net income margin of 14.1% (vs. 11.6%), demonstrating Monarch's consistent capacity to transform revenue into profits and cash in a competitive sector.
Monarch has a debt-to-equity ratio of merely 0.9%, considerably lower than the S&P 500 average of 19.4%. Cash comprises over 10% of total assets, providing it with the financial flexibility needed to fund growth or enhance returns to shareholders.
But… Mind the Volatility
The primary risk associated with Monarch stock is its heightened sensitivity to market downturns. During previous crises, it has notably underperformed the broader market—falling 41.8% during the 2022 inflation shock (vs. a 25.4% decline for the S&P 500), 75.1% during the 2020 COVID crash (vs. 33.9%), and 87.8% in the wake of the 2008 financial crisis (vs. 56.8%). Although MCRI has consistently bounced back after each of these occurrences, its significant volatility renders it particularly susceptible to systemic shocks, which investors should consider when assessing their risk tolerance.
Looking for Lower Volatility?
Monarch Casino stock continues to appear appealing if you are in for the long term. The Q2 performance underscores strong execution, while profitability and balance sheet strength support the outlook for additional gains. It's not cheap, but neither is the S&P 500—and Monarch's fundamentals arguably validate the premium. Just be mindful of the historical volatility before making a significant investment. Putting money into a single stock is always risky. The Trefis Reinforced Value (RV) Portfolio has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to deliver solid returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks offered a responsive approach to capitalizing on favorable market conditions while minimizing losses when markets decline, as explained in RV Portfolio performance metrics.