Melco Crown Entertainment (MPEL) is expected to see exponential growth this year thanks to bullish revisions on the latest quarterly report.
The company did miss expectations last period, but given the growth potential this Zacks #1 Rank (Strong Buy) could be worth the risk.
Company Description
Melco Crown Entertainment owns gaming and entertainment resorts, primarily in Macau.
Revenues Surge
On May 19 Melco Crown announced first-quarter results that included a 42% jump in revenues, to $807 million. However, that only yielded an EPS of $0.01 per share, which was a nickel shy of expectations.
Normally that is enough to pass on a stock, but analysts have been feverishly raising estimates. Mainly driven by the company’s positive outlook in the release.
Exponential Growth
Estimates for 2011 are now averaging $0.24 per share, up from $0.15 before the quarterly report. Next year’s Zacks Consensus Estimate is up 10 cents, to $0.38.
In 2010 the company made just $0.02, so profits should be up 12 times this year and another 58% next year.
Just looking at the P/E, shares look a bit pricey at over 40 times the 2011 estimate. But factoring in the long-term growth rate gives you a PEG ratio of just 0.6, which is a bargain. The price to book is right near 2.1.
Worth the Gamble?
China has had plenty of companies get busted for fraudulent activities, but there are many more than play by the rules. Taking a look at the long-term earnings trends below, MPEL might be worth the risk.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service
MELCO PBL ENTMT (MPEL): Free Stock Analysis Report
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