"Be fearful when others are greedy, and be greedy when others are fearful." -- Warren Buffett

Following gaming stocks can lead to wild swings in both stock prices and emotion. In the last five years alone, we've gone from incredible highs, through near bankruptcy, to the solid recovery we're currently in. But fear has snuck back into the picture, primarily because of recent developments in Macau, and I think it's time to get greedy.

Is the boom over?
The latest numbers out of Macau show rapidly slowing growth, causing concern for investors. May gaming revenue grew just 7.3% from the year earlier after growing 20%-plus to start the year, and well over that rate for the last handful of years.

Macaurev

Source: Gaming Inspection and Coordination Bureau Macau SAR.

There's concern that slowing growth will continue long term because China's economic growth is beginning to slow, and high-net-worth gamblers may not feel confident enough in their economic futures to gamble away millions of dollars.

What we need to keep in mind is that growth is slowing, not stopping altogether. May's revenue was still the second highest on record, and trends show that we'll slowly creep higher for the rest of the year.

Value stocks emerging
For the two year I've been covering gaming stocks for The Motley Fool, these stocks have traded at a big premium to the market because of anticipated growth. The chart below shows the enterprise value/EBITDA value of gaming stocks over the last three years. As you can see, Las Vegas Sands (NYSE: LVS) in particular had to grow into its valuation by expanding its presence and growing at existing casinos.

LVS EV / EBITDA Chart

LVS EV / EBITDA data by YCharts

But now, gaming stocks have fallen far enough that I see a value play emerging. Las Vegas Sands, Melco Crown (Nasdaq: MPEL), and Wynn Resorts (Nasdaq: WYNN) all have relatively low EV/EBITDA ratios, and their P/E ratios are far more reasonable than the nosebleed levels we saw for the last few years.

Company

EV/EBITDA

Forward P/E

Dividend Yield

Las Vegas Sands 10.5* 14.6 2.2%
Melco Crown 7.9 13.8 n/a
Wynn Resorts 9.4 14.5 2.0%
MGM Resorts 10.3 n/a n/a
Caesars Entertainment 10.5 n/a n/a

Source: Yahoo! Finance and company filings.
Note: Las Vegas Sands EV/EBITDA ratio does not include Sands Cotai Central.

Las Vegas Sands and Wynn both pay nice dividends, and from a value perspective, Melco Crown looks like the clear winner. Of course, this doesn't mean all gaming stocks are values right now. MGM Resorts (NYSE: MGM) and Caesars Entertainment (Nasdaq: CZR) not only don't provide good value from an EV/EBITDA perspective, they're laden with debt and are expected to post losses next year.

What to do now?
I think buying Las Vegas Sands, Melco Crown, or Wynn Resorts is a great value right now while the market is throwing these stocks out. Growth isn't over in Macau, and supply will stay constant until Wynn's new resort opens in 2016 at the earliest. This means that even single-digit growth will make its way to the bottom line at the few companies with resorts in Macau, and profitability will continue to improve.

I think Melco Crown is the best value right now, but I could make a strong argument for Las Vegas Sands as well. If you're new to gaming stocks, you may want to diversify with the two, giving you exposure to Macau's growth in Cotai, Singapore, and a splash of Las Vegas just for kicks. I already have an outperform call on Melco Crown, but I'm adding Las Vegas Sands to My CAPS portfolio right now to back up this pick.

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