Since October 2025, Caesars Entertainment has been in a holding pattern, posting a small return of 0.9% while floating around $26.18. However, the stock is beating the S&P 500’s 5.5% decline during that period.
Is there a buying opportunity in Caesars Entertainment, or does it present a risk to 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?
Even with the strong relative performance, 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
A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Caesars Entertainment grew its sales at a 26.5% 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
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
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. On average, Caesars Entertainment’s ROIC increased by 2.8 percentage points annually each year over the last few years. 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 $24.88 billion of debt exceeds the $972 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. Following its recent outperformance in a weaker market environment, the stock trades at 68× forward P/E (or $26.18 per share). This multiple tells us a lot of good news is priced in - you can find more timely opportunities elsewhere. We’d recommend looking at our favorite semiconductor picks and shovels play.
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