Caesars Entertainment’s 31.8% return over the past six months has outpaced the S&P 500 by 20.3%, and its stock price has climbed to $27.17 per share. This performance may have investors wondering how to approach the situation.
Is now the time to buy Caesars Entertainment, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Do We Think Caesars Entertainment Will Underperform?
We’re glad investors have benefited from the price increase, but we're cautious about Caesars Entertainment. Here are three reasons there are better opportunities than CZR and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Caesars Entertainment grew its sales at a 18.9% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell slightly short of our standards for the consumer discretionary sector, which enjoys a number of secular tailwinds.
2. New Investments Bear Fruit as ROIC Jumps
We like to invest in businesses with high returns, but the trend in a company’s ROIC can also be an early indicator of future business quality.
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. Over the last few years, Caesars Entertainment’s ROIC averaged 1.8 percentage point increases each year. This is a good sign, and we hope the company can continue improving.
3. High Debt Levels Increase Risk
As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.
Caesars Entertainment’s $24.93 billion of debt exceeds the $959 million of cash on its balance sheet. Furthermore, its 7× net-debt-to-EBITDA ratio (based on its EBITDA of $3.28 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. Caesars Entertainment 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 Caesars Entertainment can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.
Final Judgment
Caesars Entertainment doesn’t pass our quality test. With its shares topping the market in recent months, the stock trades at 141× forward P/E (or $27.17 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - you can find more timely opportunities elsewhere. We’d recommend looking at the most entrenched endpoint security platform on the market.
Stocks We Like More Than Caesars Entertainment
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
