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It's Time to Buy Las Vegas Sands

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There's only one company that has a presence in the top three gambling markets in the world, and that is Las Vegas Sands (NYSE: LVS  ) . The gambling giant owns one of only two casinos in Singapore and dominates the Cotai Strip in Macau, some of gaming's most prized property.

But shares have struggled recently. So far this year, Las Vegas Sand's stock is down 14%, while Macau competitor Melco Crown (Nasdaq: MPEL  ) is up 75% and Wynn Resorts (Nasdaq: WYNN  ) is up 28%. That share performance has given an opportunity for investors who are looking for the best gaming stock on the market. Here are the three reasons I like Las Vegas Sands.

Growing like a weed
With Las Vegas gaming in the dumps and Singapore locked up until 2017, Macau is the only big gaming market expanding right now. If we include MGM Resorts (NYSE: MGM  ) , which has a 51% stake in a casino in Macau, the only one of the four major U.S. traded operators that will open a casino in the next four years is Las Vegas Sands.

The new casino on Sites 5&6 will include three towers located next to Melco's City of Dreams and across the street from The Venetian Macau and Four Seasons Macau. The prime Cotai Strip location will add to a stable of profitable casinos and solidify Las Vegas Sands' position as the dominant player in the market.

If there's one thing CEO Sheldon Adelson has mastered, it's the art of squeezing every penny possible from his casinos in Macau. In the first quarter, Sands' casinos had an EBITDA margin of 33.4%, besting Wynn at 31.5% and miles ahead of Melco Crown at 15%. Include Marina Bay Sands in the mix, and the picture gets better. Singapore's low tax rate and packed casino resulted in an astonishing 48.6% EBITDA margin at Marina Bay Sands in the first quarter.

But the best reason to buy Las Vegas Sands now is the company's improving value. The falling stock price has left the company with a 13.6 trailing enterprise value/adjusted EBITDA ratio, on par with Wynn Resorts as least expensive of the four operators. But that doesn't include a full year of operations in Singapore or account for the growth that Sites 5&6 will supply. All told, Las Vegas Sands is flat out the best value in gaming.

Foolish bottom line
Early in 2011, I was high on Melco Crown because it was the best value in gaming, but the tides have turned. Las Vegas Sands is looking much more attractive, and as the company executes a deleveraging strategy, its risks will diminish as well. Do you agree that Las Vegas Sands is a great buy right now? Leave your thoughts in our comments section below. And be sure to follow gaming stocks in My Watchlist to keep track of our Foolish analysis.

Fool contributor Travis Hoium owns shares of Melco Crown that are covered with call options and is short put options in Las Vegas Sands. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

Motley Fool newsletter services have recommended buying shares of Melco Crown Entertainment. Try any of our Foolish newsletter services free for 30 days. 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 Motley Fool has a disclosure policy.

Read/Post Comments (5) | Recommend This Article (15)

Comments from our Foolish Readers

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 June 24, 2011, at 2:52 PM, cbotrader wrote:

    Let me begin by saying I have been long this stock since it was trading below $3.00 and I love the company for all of the reasons you have mentioned and more.

    I do not disagree with your article, but for the last six months I have ben scratching my head wondering what other people are seeing that I do not. I really believe this should be a $90 stock and it is not...and I have been wrong.

    I would respectfully suggest that no article on LVS is complete without mentioning the investigations that are hanging over this company like an axe.

    Fellow professional traders I respect caution me that depending on what it discovered in these investigations, serious consequences could be the result which would have negative implications for LVS....huge negative consequences in fact.

    Your article should have discussed these elements and left the reader to judge.

  • Report this Comment On June 24, 2011, at 3:27 PM, JF125780 wrote:

    I have owned LVS since Sheldon took them public in 2004 and have added shares along the way.

    Travis Holum has done his homework here, but the trouble with LVS at this point is CEO Levin is cashing in around 7 million dollars a month in stock. He is 73 and getting ready to retire in Nov. 2012 and at that time this stock along with being very profitable should really take off.

  • Report this Comment On June 24, 2011, at 7:44 PM, TMFFlushDraw wrote:


    I probably should have at least mentioned the investigation. I have covered that a few times in the past as you can see below. Thanks for bringing it up.

    Travis Hoium

  • Report this Comment On June 25, 2011, at 12:51 AM, testerlowterm wrote:

    i agree with you on the value but the reason shares arent raging 50% up or 25% up is its market cap. its a huge company in the gaming industry and you will need to find a lot of fund manager to start pouring billions in before it can become a $50billion company even with growth most fund mangers are looking for income and LVS needs to grow profits to more in line of Wynn before it can have a huge run up in prices

    the reason most ppl love wynn is cuz with only 3 casinos it dominates the half that LVS doesn't own and thats what makes shares skyrocket also Steve's leadership is great and if they were to grow there company with 2 or 3 more casinos in the next 10 years wynn may be in the same line as LVS

  • Report this Comment On June 28, 2011, at 2:51 PM, Rich2000ac wrote:

    I absolutely love LVS. The investigation creates a great opportunity to buy this stock cheap.

    Remember, LVS was about $150 a few years ago and over $55 last November.

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Related Tickers

10/27/2016 12:36 PM
LVS $56.84 Down -1.18 -2.03%
Las Vegas Sands CAPS Rating: ****
MGM $25.92 Down -0.21 -0.80%
MGM Resorts Intern… CAPS Rating: ***
MPEL $16.98 Down -0.30 -1.74%
Melco Crown Entert… CAPS Rating: *****
WYNN $93.75 Down -2.00 -2.09%
Wynn Resorts CAPS Rating: ****