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Is Eldorado Resorts (ERI) Stock Undervalued Right Now?

Zacks Equity Research

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One stock to keep an eye on is Eldorado Resorts (ERI). ERI is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with P/E ratio of 9.70 right now. For comparison, its industry sports an average P/E of 25.97. Over the past year, ERI's Forward P/E has been as high as 40.57 and as low as 3.42, with a median of 19.45.

Another notable valuation metric for ERI is its P/B ratio of 1.49. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 4.34. Within the past 52 weeks, ERI's P/B has been as high as 4.84 and as low as 0.49, with a median of 3.33.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. ERI has a P/S ratio of 0.58. This compares to its industry's average P/S of 1.06.

Finally, our model also underscores that ERI has a P/CF ratio of 5.13. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 16.03. ERI's P/CF has been as high as 16.62 and as low as 1.70, with a median of 11.35, all within the past year.

Value investors will likely look at more than just these metrics, but the above data helps show that Eldorado Resorts is likely undervalued currently. And when considering the strength of its earnings outlook, ERI sticks out at as one of the market's strongest value stocks.


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