Is Melco Resorts & Entertainment (MLCO) Attractive After Recent Share Price Swings?

• If you are wondering whether Melco Resorts & Entertainment is a bargain or a value trap at around US$6.35, you are not alone. The answer starts with looking closely at what you are really paying for its business today.
• The stock has had a mixed run, with a 3.6% gain over the last 7 days, a 20.7% decline over the last 30 days, a 15.4% decline year to date, but a 13.4% gain over the last year, set against much larger declines of 53.1% and 60.3% over the last 3 and 5 years.
• Recent coverage of Melco Resorts & Entertainment has focused on its position in the Macau gaming market and how investor sentiment has reacted to sector wide headlines and regulatory developments. These themes have influenced trading activity and help frame why the share price has moved the way it has.
• On Simply Wall St’s valuation checks, Melco Resorts & Entertainment scores 4 out of 6. We will unpack this using several common valuation angles before circling back at the end to a broader way of thinking about what this score might mean for long term investors.

Melco Resorts & Entertainment delivered 13.4% returns over the last year. See how this stacks up to the rest of the Hospitality industry.

Approach 1: Melco Resorts & Entertainment Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model projects the cash a company could generate in the future and then discounts those cash flows back to today to estimate what the whole business might be worth now.

For Melco Resorts & Entertainment, the model starts with last twelve months free cash flow of about US$190.4 million. Analysts provide explicit free cash flow estimates out to 2027, and Simply Wall St then extrapolates those out to 2035 using a 2 Stage Free Cash Flow to Equity approach. On this basis, free cash flow in 2026 is projected at US$560.2 million and in 2027 at US$698.2 million, with ten year projections reaching US$1,278.5 million by 2035, all in US$.

Discounting these projected cash flows back to today produces an estimated intrinsic value of US$21.61 per share. Against a recent share price around US$6.35, the model implies the stock trades at roughly a 70.6% discount to this DCF estimate. This suggests the shares appear materially undervalued on this framework alone.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Melco Resorts & Entertainment is undervalued by 70.6%. Track this in your watchlist or portfolio, or discover 872 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 Melco Resorts & Entertainment.

Approach 2: Melco Resorts & Entertainment Price vs Earnings

For a profitable company, the P/E ratio is a useful shortcut because it tells you how much you are paying for each dollar of current earnings. Investors typically accept a higher or lower P/E depending on what they expect for future growth and how much risk they see in the business.

Melco Resorts & Entertainment currently trades on a P/E of 23.82x. That sits above the Hospitality industry average of 21.51x, but below the broader peer average of 36.38x. On the surface, that places Melco somewhere between its direct and indirect valuation references.

Simply Wall St also calculates a “Fair Ratio” for the company, which indicates what P/E might be reasonable given its earnings growth profile, industry, profit margins, market cap and risk factors. For Melco, this Fair Ratio is 26.97x. This is more tailored than a simple comparison with industry or peer averages because it adjusts for company specific characteristics rather than treating all peers as equal. Since the current P/E of 23.82x is below the Fair Ratio, this framework suggests that the shares appear undervalued on an earnings multiple basis.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1427 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Melco Resorts & Entertainment Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simply your own story about a company that sits behind the numbers you use for fair value, revenue, earnings and margins.

A Narrative links what you believe about Melco Resorts & Entertainment as a business to a financial forecast, and then to a fair value estimate that you can compare directly with the current share price.

On Simply Wall St, Narratives live in the Community page and are designed to be easy to use, so you can adjust assumptions and instantly see how your fair value changes. This can help you decide whether you think the stock looks expensive or cheap at today’s price.

Narratives update automatically when new information such as earnings or news is added. For Melco Resorts & Entertainment, you might see one investor using cautious assumptions that point to a much lower fair value, while another uses more optimistic inputs that support a far higher fair value for the same stock.

Do you think there’s more to the story for Melco Resorts & Entertainment? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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