Wynn Macau. Image source: Wynn Resorts.

Both Las Vegas Sands (LVS 0.81%) and Wynn Resorts (WYNN -0.82%) have seen their revenue hit hard from weakness in the gaming market in recent years, and in particular, the declines the key Macau gaming market has suffered have hurt both stocks. After having fallen precipitously, though, both Wynn and Las Vegas Sands have rebounded sharply in 2016, and some believe the worst for Macau could finally be behind it. With that in mind, some investors want to know which of the two stocks looks more promising today.

Let's look more closely at Las Vegas Sands and Wynn Resorts by drawing comparisons and contrasts on key metrics, with the goal of figuring out which stock looks like a better buy.

Valuation and stock performance

Both Las Vegas Sands and Wynn Resorts have bounced off their worst levels of the year, but Wynn has done a better job of sustaining its gains. However, neither has managed to claw back all of its losses over the past year. Las Vegas Sands is down 17% compared to where it was in July 2015, compared to just a 12% drop for Wynn Resorts.

From a valuation perspective, however, Wynn's relative performance has left it looking more expensive than its rival. On a trailing basis, Wynn stock trades at an earnings multiple of 29, which is far higher than the 19 times trailing earnings Las Vegas Sands sports currently. When you pull in earnings expectations in the near future, though, the gap narrows. Wynn's forward earnings multiple falls to 18, but that's still just a bit higher than the 16.5 times forward earnings of Sands' stock price. As a result, Las Vegas Sands appears to give somewhat better value than Wynn Resorts, especially if you question the magnitude of Wynn's expected earnings increases.


From a dividend perspective, Las Vegas Sands also has a clear lead, at least based on regular dividend payments. Wynn's dividend yield right now is just 2.2%, compared to 6.3% for Sands.

One thing to bear in mind is that Wynn has traditionally preferred special dividends over regular quarterly payouts, making massive dividend payments in the past that have greatly supplemented its effective yield. Yet Wynn cut its dividend by two-thirds in 2015, arguing that it didn't make sense to return money to shareholders when the company needed it for development purposes. That argument hasn't stopped Las Vegas Sands from continuing to make dividend increases, but increasingly, investors believe high debt levels, expansion needs, and falling free cash flow will eventually force Sands to follow suit and cut its quarterly payout to shareholders.

For now, Sands has a clear lead in dividend yield, which many investors will find appealing. Yet for those who believe a dividend cut from Sands could be in the offing, the certainty of knowing Wynn's dividend policy might be preferable to the fear of the unknown Las Vegas Sands investors will have to endure.

Growth prospects and risks

The problems Las Vegas Sands and Wynn Resorts have faced over the past couple of years have been a huge reversal from their joint success further in the past. Those problems have continued recently, but there are signs that conditions might have hit bottom. In its most recent quarterly report, Las Vegas Sands reported a 10% decline in revenue, and net income fell by three-eighths. Both figures were worse than investors had expected, although some natural volatility in gaming results went against Sands during the quarter. Encouragingly, though, Sands did better than its peers in areas like Macau's Cotai Strip, and that helped the company boost its overall market share in the key region. A rebound in the Las Vegas market also helped cushion the Macau blow for Las Vegas Sands, even though its influence on the company is now relatively modest. Sands hopes its approach to capturing mass-market visitors to Macau will pay off in the long run, even as competitors expand their presence in the key Asian gaming capital.

For Wynn Resorts, the numbers from Macau showed some of the progress the casino giant has made in halting the downward trajectory of its business. During the first quarter, revenue from Macau dropped 14%, with adjusted property EBITDA declining 10%. Bigger drops in table-game revenue from VIP players revealed Wynn's exposure to that segment, which has been threatened by potential regulation from the Chinese mainland. Las Vegas-related results were narrowly mixed, with a revenue increase of less than 1% and a 1.5% drop in pre-tax operating income. Wynn is hinging its future success on development, including the soon-to-open Wynn Palace in Macau and its Boston Harbor project in Massachusetts. If Macau keeps rebounding, then Wynn is in a good position to benefit.

Overall, the valuation and dividend advantages Las Vegas Sands has makes it look like the better buy, especially because of Wynn's big share-price jump in recent months. Both stocks are likely to follow the sentiment of the gaming industry, especially in Asia, and if Macau can keep climbing out of its depressed state, then both Wynn Resorts and Las Vegas Sands could make good bets.