MGM Resorts (MGM)

Hospitality and casino entertainment company MGM Resorts (NYSE:MGM) met Wall Street’s revenue expectations in Q3 CY2025, with sales up 1.6% year on year to $4.25 billion. Its non-GAAP profit of $0.24 per share was 19.9% below analysts’ consensus estimates.

Company Overview

Operating several properties on the Las Vegas Strip, MGM Resorts (NYSE:MGM) is a global hospitality and entertainment company known for its resorts and casinos.

Casino operators enjoy limited competition because gambling is a highly regulated industry. These companies can also enjoy healthy margins and profits. Have you ever heard the phrase ‘the house always wins’? Regulation cuts both ways, however, and casinos may face stroke-of-the-pen risk that suddenly limits what they can or can't do and where they can do it. Furthermore, digitization is changing the game, pun intended. Whether it’s online poker or sports betting on your smartphone, innovation is forcing these players to adapt to changing consumer preferences, such as being able to wager anywhere on demand.

Competitors in the casino and hospitality industry include Caesars Entertainment (NASDAQ:CZR), Las Vegas Sands (NYSE:LVS), and Wynn Resorts (NASDAQ:WYNN).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, MGM Resorts’s sales grew at a solid 20.3% compounded annual growth rate over the last five years. Its growth beat the average consumer discretionary company and shows its offerings resonate with customers.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. MGM Resorts’s recent performance shows its demand has slowed as its annualized revenue growth of 6% over the last two years was below its five-year trend. Note that COVID hurt MGM Resorts’s business in 2020 and part of 2021, and it bounced back in a big way thereafter.

We can dig further into the company’s revenue dynamics by analyzing its three most important segments: Casino, Hotel, and Dining, which are 54%, 18.7%, and 17.6% of revenue. Over the last two years, MGM Resorts’s revenues in all three segments increased. Its Casino revenue (Poker, sports betting) averaged year-on-year growth of 11.6% while its Hotel (overnight bookings) and Dining (food and beverage) revenues averaged 1.5% and 3.1%.

This quarter, MGM Resorts grew its revenue by 1.6% year on year, and its $4.25 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will see some demand headwinds.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

MGM Resorts’s operating margin has been trending down over the last 12 months and averaged 7.5% over the last two years. Although this result isn’t good, the company’s solid historical revenue growth suggests it ramped up investments to capture market share. We’ll keep a close eye to see if this strategy pays off.

In Q3, MGM Resorts generated an operating margin profit margin of negative 2.7%, down 10.2 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

MGM Resorts’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q3, MGM Resorts reported adjusted EPS of $0.24, down from $0.54 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects MGM Resorts’s full-year EPS of $2.17 to grow 11.7%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

MGM Resorts has shown weak cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 7.6%, subpar for a consumer discretionary business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

MGM Resorts historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.9%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, MGM Resorts’s ROIC has decreased over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Debt is a tool that can boost company returns but presents risks if used irresponsibly. As long-term investors, we aim to avoid companies taking excessive advantage of this instrument because it could lead to insolvency.

MGM Resorts’s $31.25 billion of debt exceeds the $2.13 billion of cash on its balance sheet. Furthermore, its 13× net-debt-to-EBITDA ratio (based on its EBITDA of $2.32 billion over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. MGM Resorts could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope MGM Resorts can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

On the other hand, its and its EBITDA fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 2.9% to $30.30 immediately following the results.

Updated: December 3, 2025 at 9:55 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own MGM Resorts, you should also grasp the company’s longer-term business quality and valuation.

We cheer for all companies serving everyday consumers, but in the case of MGM Resorts, we’ll be cheering from the sidelines. To begin with, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. On top of that, MGM Resorts’s projected EPS for the next year is lacking, and its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

MGM Resorts’s P/E ratio based on the next 12 months is 15.2x. This valuation multiple is fair, but we don’t have much confidence in the company. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $42.50 on the company (compared to the current share price of $35.53).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.