Investment Thesis
Red Rock Resorts demonstrates strong operational profitability with 28.3% operating margins and 22.1% YoY net income growth, but faces severe balance sheet stress from extreme leverage (24.74x debt-to-equity) and deteriorated liquidity (current ratio 0.81x). The company's thin 2.9x interest coverage and minimal free cash flow ($22.6M after CapEx) create substantial financial distress risk if revenue declines or interest rates rise further.
Strengths
- Strong operational profitability with 28.3% operating margin and 30.1% ROE
- Improving earnings with 22.1% YoY net income growth and 23.3% EPS growth
- Positive operating cash flow of $139.8M demonstrates underlying business cash generation
Risks
- Extreme leverage with 24.74x debt-to-equity ratio and $3.5B debt against only $142.7M equity
- Poor liquidity ratios (current ratio 0.81x, quick ratio 0.76x) indicate inability to cover short-term obligations
- Thin interest coverage ratio of 2.9x leaves minimal buffer for operational deterioration or rate increases
- Minimal free cash flow of $22.6M after capital expenditures ($117.2M) constrains debt reduction capacity
- Low ROA of 1.0% despite high margins suggests inefficient asset utilization on $4.2B asset base
Key Metrics to Watch
- Interest coverage ratio trend and debt service capacity
- Quarterly free cash flow and debt reduction progress
- Current and quick ratios for liquidity improvement signals
- Operating cash flow sustainability amid economic cycles
- Capital expenditure levels relative to depreciation
Financial Metrics
Revenue
507.3M
Net Income
42.9M
EPS (Diluted)
$0.73
Free Cash Flow
22.6M
Total Assets
4.2B
Cash
134.0M
Profitability Ratios
Gross Margin
N/A
Operating Margin
28.3%
Net Margin
8.5%
ROE
30.1%
ROA
1.0%
FCF Margin
4.5%
Balance Sheet & Liquidity
Current Ratio
0.81x
Quick Ratio
0.76x
Debt/Equity
24.74x
Debt/Assets
94.1%
Interest Coverage
2.90x
Long-term Debt
3.5B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-08T07:27:28.159749 |
Data as of: 2026-03-31 |
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