Better Buy: Las Vegas Sands or MGM?

In this Motley Fool series, we pit two stocks against each other on five criteria to determine the better buy.

Today's matchup is a battle of two much-debated casino stocks: Las Vegas Sands (NYSE: LVS) vs. MGM (NYSE: MGM).

Together with Wynn Resorts (Nasdaq: WYNN), Las Vegas Sands and MGM dominate the Las Vegas Strip. MGM owns the MGM Grand (naturally), the Bellagio, and its new City Center complex among many others. Las Vegas Sands owns the Venetian and the Palazzo in Vegas, the Venetian in Macau (aka China's version of Vegas), and a few other properties.  

Using five short-of-scientific-but-carefully-chosen criteria, let's determine which is the better buy.

Round 1: Balance sheet
Both companies are heavily leveraged as they keep expanding. As of its last reported quarter, Las Vegas Sands has $6.5 billion in net debt vs. $6.3 billion in equity. MGM holds a shocking $12.3 billion in net debt vs. just $3.8 billion in equity. For another comparison, Wynn's debt is only about half of its equity. Advantage: Las Vegas Sands.

Round 2: Operations
This is a more fun call when companies are profitable. Neither of these guys has been profitable since 2007. However, MGM has at least dropped its capital expenditures so that it has positive free cash flow in the trailing 12 months. Advantage: MGM.

Round 3: Safer bet
In other words, which company will put you in a better position to "never lose money" (as super-investor Warren Buffett says)? When a company's highly leveraged and losing cash, it's hard to call it a safe bet. But a winner must be declared. Las Vegas Sands' operations and competitive landscape in Macau are more of an unknown, but MGM has a lot riding on its newly built City Center complex in Vegas. Incidentally, Wynn would have won the first three rounds (and these advantages are priced into its stock price), but it ain't competing. Advantage: Push.

Round 4: Sexier bet
On the flip side of safe is sexy, the upside growth potential. Las Vegas Sands actually gets significantly more revenue in Macau than it does Vegas. Macau passed Vegas as a gambling center back in 2006, but since it's China's only gambling destination, and since there were only six licenses given out, Macau's growth prospects outstrip those of Vegas. Of course, investors looking for a purer play in Macau can look to Melco Crown Entertainment (Nasdaq: MPEL), which also has one of the six licenses and operates the fantastically named City of Dreams. But in the absence of Melco in this battle ... Advantage: Las Vegas Sands.

Round 5: CAPS rating
Our CAPS community rates both Las Vegas Sands and MGM a lowly two stars (out of five). Advantage: Push.

The blow-by-blow recap

There you have it. In a squeaker, Las Vegas Sands takes down MGM 3-2, making it our better buy. But is it an actual buy? My colleague Jordan DiPietro says yes in Buy, Sell, or Hold: Las Vegas Sands. What do you think? Vote in the poll below. Then share your thoughts in the comments box below the poll.