MGM Resorts InternationalMGMNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $86.72 per share(market-calibrated)

+141.9%

Upside to Fair Value

Current

$35.85

Pure Model

$114.96

Fair Value

$86.72

Bull Case

$169.92

Bear Case

$76.37

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

1.29%

Calibrated Growth

2.40%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $114.96.

What's Driving This Ratingfor MGM

↓

CapEx normalizing toward maintenance

Historical CapEx is 5.03% of revenue (heavy investment phase). Model fades this to 4.00% by Year 10, freeing up ~$230M in annual FCF. This is the biggest driver of long-term cash flow improvement.

→

Moderate revenue growth

Analyst consensus projects 0.81% revenue growth, fading to 3.00% by Year 10. Revenue reaches $22.5B (vs $17.5B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $154.54/share (41.2x terminal FCF) while exit multiple gives $75.38/share (29.8x terminal FCF). The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 1.29% perpetual growth — 171bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 67.23% indicates efficient cash generation. FCF reaches $3.1B by Year 10 (13.93% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.40

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)10.82%

Cost of Debt

Pre-tax Cost of Debt0.97%

Tax Rate21.00%

After-tax Cost of Debt0.76%

Equity Weight (E/V)14.46%

Debt Weight (D/V)85.54%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (14.46% × 10.82%) + (85.54% × 0.76%)

= 5.50%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$17.7B	$18.3B	$19.4B	$20.6B	$22.5B
EBIT	$2.0B	$2.1B	$2.3B	$2.4B	$2.7B
Tax	$428M	$442M	$476M	$509M	$561M
NOPAT	$1.6B	$1.7B	$1.8B	$1.9B	$2.1B
+ Depreciation	$1.6B	$1.6B	$1.7B	$1.8B	$2.0B
- Capex	$889M	$876M	$885M	$892M	$898M
- Δ NWC	$14M	$32M	$56M	$60M	$65M
Free Cash Flow	$2.3B	$2.4B	$2.6B	$2.8B	$3.1B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$2.1B	$2.0B	$2.0B	$1.9B	$1.8B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.1B

Terminal Growth Rate3.00%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$128.9B

PV of Terminal Value$75.4B

Exit Multiple Method

Year 10 EBITDA$4.7B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$93.1B

PV of Terminal Value$54.5B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$19.6B

PV of Terminal Value$75.4B

Enterprise Value$95.0B

(-) Net Debt$54.1B

Equity Value$40.9B

Shares Outstanding265M

Price per Share$154.54

Exit Multiple Method

PV of Projected FCFs$19.6B

PV of Terminal Value$54.5B

Enterprise Value$74.1B

(-) Net Debt$54.1B

Equity Value$20.0B

Shares Outstanding265M

Price per Share$75.38

Pure Model Fair Value

$114.96

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
3.50%	$197.79	$181.59	$166.15	$151.43	$137.40
4.50%	$141.85	$181.59	$166.15	$151.43	$137.40
5.50%	$73.28	$90.65	$114.96	$151.43	$137.40
6.50%	$30.96	$40.27	$52.23	$68.18	$90.52
7.50%	$1.08	$6.68	$13.52	$22.07	$33.07

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$76.37

113.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.75

Base Case

$114.96

220.7% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.40

Bull Case

$169.92

374.0% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.19

Key Assumptions & Drivers• Consumer Cyclical Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth0.81%

Year 3 Revenue Growth1.79%

Year 5 Revenue Growth3.00%

Year 7 Revenue Growth3.00%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin11.52%

Terminal EBIT Margin12.00%

Tax Rate21.00%

Historical Capex / Rev5.03%

Terminal Capex / Rev4.00%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 20x EV/EBITDA (Consumer Cyclical sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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