Has Boyd Gaming Become the Perfect Stock?

Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?

One thing's for sure: You'll never discover truly great investments unless you actively look for them. Let's discuss the ideal qualities of a perfect stock, then decide if Boyd Gaming (NYSE: BYD  ) fits the bill.

The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:

  • Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line.
  • Margins. Higher sales mean nothing if a company can't produce profits from them. Strong margins ensure that company can turn revenue into profit.
  • Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.
  • Money-making opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.
  • Valuation. You can't afford to pay too much for even the best companies. By using normalized figures, you can see how a stock's simple earnings multiple fits into a longer-term context.
  • Dividends. For tangible proof of profits, a check to shareholders every three months can't be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.

With those factors in mind, let's take a closer look at Boyd Gaming.

Factor

What We Want to See

Actual

Pass or Fail?

Growth 5-Year Annual Revenue Growth > 15% 3.3% Fail
  1-Year Revenue Growth > 12% 6.9% Fail
Margins Gross Margin > 35% 49.4% Pass
  Net Margin > 15% 0.4% Fail
Balance Sheet Debt to Equity < 50% 270.7% Fail
  Current Ratio > 1.3 1.07 Fail
Opportunities Return on Equity > 15% 0.7% Fail
Valuation Normalized P/E < 20 107.00 Fail
Dividends Current Yield > 2% 0% Fail
  5-Year Dividend Growth > 10% 0% Fail
       
  Total Score   1 out of 10

Source: S&P Capital IQ. Total score = number of passes.

Since we looked at Boyd Gaming last year, the company has lost a point. Although the company turned profitable, it did so just barely, and the stock has struggled just to do a little better than breakeven over the past year.

Most investors in the gaming industry know the big names in the business, with Las Vegas Sands (NYSE: LVS  ) and Wynn Resorts (Nasdaq: WYNN  ) having international reach and having profited significantly from their presence in Macau. Boyd, on the other hand, focuses on the U.S., with a lot of regional exposure throughout the country. That's been a tough area throughout the recession, and heightened competition from Penn National and a host of other regionals has held Boyd back.

But one area for huge potential growth is in online poker. Boyd has agreed to team up with MGM Resorts (NYSE: MGM  ) and the company that owns well-known online poker site Party Poker if the U.S. legalizes Internet poker. Even though Zynga (Nasdaq: ZNGA  ) would likely join traditional casino companies in the race to capitalize on the game, Boyd would stand a good chance of beating out its rivals, especially with Party Poker on its side.

For now, though, Boyd is stuck in the dumps. In its most recent quarter, Boyd's New Jersey sales fell 4%, and although the company's operations in the Midwest and South returned to a small profit, it wasn't enough to meet what analysts had expected from the company.

For Boyd to improve, what it really needs is for gaming to get a shot in the arm from somewhere. An economic recovery would do the trick, but what's more likely is the future legalization of online poker setting off a new gold rush as the entire industry tries to cash in.

Keep searching
No stock is a sure thing, but some stocks are a lot closer to perfect than others. By looking for the perfect stock, you'll go a long way toward improving your investing prowess and learning how to separate the best investments from the rest.

If you like gaming stocks, you ought to know more about Las Vegas Sands. The Fool's premium report on Las Vegas Sands tells you everything you need to know, and also provides a year's worth of free updates. Read your copy today.

Click here to add Boyd Gaming to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 04, 2012, at 1:21 PM, cp757 wrote:

    Most investors in the gaming industry know the big names in the business, with Las Vegas Sands being the one with the biggest growth story. They will add 50 thousand rooms in the next 6 or 7 years.

    In Macau

    Las Vegas Sands is at the right place at the right time and Macau is on pace for 37.445 billion dollars. In 2011 revenue for Macau was $33.5 billion dollars. Macau did 3.3 billion dollars in August and this increase in revenue is due to mass market gambling.

    Las Vegas Sands has the highest percentage in mass market. The most rooms, gaming tables, and slots. The revenue in Macau will be 4 billion dollars higher in 2012 than it was in 2011 and will go even higher in 2013.

    The Hotel Rooms in Macau that Las Vegas Sands will open over the next few months is 9,324 4/5‐star hotel rooms. That's 39% of all the 4/5‐star hotel inventory and the other operators average just 12.2% each.

    In Macau the reason Las Vegas Sands is going to dominate the market is because they have a total Table Capacity of 1,535 mass tables and that's 27% of all the mass tables

    The 5 other operators in Macau do not have the 135-player Imperial Stadium Baccarat Multi-Tabling games like The Venetian Macau and it's 100-player younger cousin at the Sands Macau

    In Macau Las Vegas Sands owns, The Venetian Macao, The Plaza Macao, Four Seasons Hotel Macao and the Four Seasons-branded apartments at the Sands Cotai Central development, as well as the Sands Macao on the Macau peninsula. The company is currently finishing construction on a 6,400-room complex at Sands Cotai Central, which will feature the Sheraton, St. Regis, Holiday Inn, and Intercontinental hotel brands.

    Las Vegas Sands will build The Venetian Hengqin International Convention and Resort Project, a 10,000 room multi-billion dollar project to develop parts of Hengqin Island into a convention and resort destination.

    The project will include four million sq ft of convention space, hotels, retail, vacation homes, and golf, tennis and yachting amenities. Hengqin Island is next to Cotai Central giving Las Vegas Sands added room capacity with a total of almost 24,000 rooms just in the Macau area.

    In Barcelona

    Las Vegas Sands president and chief operating officer Mike Leven told a news conference here that its verdict would now come early in September 2012.

    "Construction would begin in mid-2013 and take five to 10 years", Leven said. Construction and tourism have been the main engines of Spanish growth for 20 years. Sheldon Adelson is looking at Barcelona as a spot for the new casino which could come together soon . Barcelona would add the attraction of a tour ship dock which could drive more traffic than the proposed Madrid location.

    Adelson has not made the final decision and is waiting for final terms from the local governments. The European Las Vegas, is a complex that would have 12 great hotels with 36,000 rooms, 6 casinos, 50,000-seat sports center, 3 golf courses and a Convention Center plus 27 restaurants that would start construction in 2013.

    In Singapore

    The Marina Bay Sands has 2,561 rooms with 99% occupancy and will add 1500 to 2500 rooms to the location.

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