In regards to casinos and gaming stocks, they all have a few issues in frequent. All are rated “high risk” by analysts and carry an above-average degree of volatility. All have earnings that have a tendency to fluctuate wildly from year to year. They’re also all possibly really lucrative. By way of example, Wynn Resorts (NASDAQ: WYNN) was trading as low as $14.50 as not too long ago as 2009, and two years later in 2011 reached a higher of $172.58. I don’t know about you, but the threat just may very well be worth the reward.
We’re obtaining ahead of ourselves. I’d prefer to examine the “big three” of publicly traded casino corporations and establish which, if any, is ideal positioned to provide a considerable move for the upside. Our candidates in no unique order consist of:
1.) Wynn Resorts
As mentioned above, Wynn has had an outstanding run considering that its lows of 2009. Even so, it has pulled back significantly from its highs, and some analysts appear to assume it has area to run. Like most casino operators, the subsequent location of growth appears to be Macau in China. The business opened Wynn Macau, its initially Chinese home in 2006, and followed it up with Encore in 2010. Wynn currently has applied to develop an further 52 acres of land in Macau.
At the moment Wynn trades at 21.5 instances TTM earnings, that are expected (by consensus estimates) to grow to $6.05 and $6.82 per share in 2013 and 2014, respectively, up from $5.46 for 2012. This translates to year over year growth of ten.8% and 12.7%, which might or may not justify the higher P/E ratio. Nevertheless, this really is in the low finish of historical levels. Additionally, Wynn pays a 1.76% dividend yield, in addition to special dividends of involving $4.00 and $8.00 per share paid 5 out of the last 6 years, producing extremely good income for shareholders, a rarity among casino stocks.
2.) MGM Resorts International (NYSE: MGM)
The smallest of your three firms profiled here by market capitalization, MGM is one of a kind mainly because it’s the least dependent on China for future development. MGM owns and operates ten casinos on the Las Vegas strip, which includes the multi-billion dollar City Center. It really is a companion in joint ventures such as the Borgata in Atlantic City, along with the MGM Grand Macau. MGM’s efforts are yet to bear fruit for investors, because the corporation has not had positive earnings given that 2007, making a P/E evaluation not meaningful.
Moreover, the business has cash on hand of roughly $2 billion and $13.five billion in debt, which could be an enormous red flag for investors. Although MGM could possibly make the best development from the three, it simply seems also risky until the enterprise demonstrates it could possibly essentially earn funds in the ambitious projects it keeps undertaking.
three.) Las Vegas Sands Corp. (NYSE: LVS)
By far the largest in the three by marketplace cap, Las Vegas Sands has had really a roller-coaster ride more than the previous quite a few years. Trading at $45.79 as of this writing, this stock could have been bought in 2009 in the fire-sale price of $1.38 when the complete world believed casinos had been all going bankrupt. I myself bought in at about $2.00 in 2009 and sold for $5.00 just weeks later, thinking I was a genius! Anyways, the firm operates numerous high-profile Vegas casinos, also as 3 in Macau. Obtaining been by far the most ambitious from the three when it comes to Chinese marketplace entry, the Sands Macao was the very first Vegas-style casino to open in Macau in 2004.
Sands has generated good earnings throughout most of the last decade, together with the only two damaging years getting 2008-09. Sands at the moment trades at 26.8 times TTM earnings, which sounds expected until you account for the consensus estimate of a 15% annual growth rate for the following 3 years. Sands also recently began paying a dividend of two.16%, as well as a special dividend of $2.75 this year, as a lot of corporations are performing for tax advantages.
In conclusion, I’d say that Wynn or Sands could both be excellent investments, offered you happen to be bullish on the gaming business, and specifically Chinese gaming. I think Wynn looks such as the most shareholder-friendly of your 3 as a result of its fantastic record of specific dividends. In actual fact, like these unique dividends, Wynn has offered shareholders with an average yield of 7.4% given that 2009. This really is a very nice yield for just about any firm, and in particular good for one using the possible upside of Wynn.