Las Vegas Sands Corp. (NYSE:LVS) is the biggest gaming company in the world, but that doesn't mean it's an easy buy for investors. There are positives, like the company's strong cash flow from Macau and Singapore, where most of its revenue comes from. But the company's growth has slowed in recent years and even gone backward at times, and there aren't many growth opportunities ahead.
With that layout in mind, is Las Vegas Sands stock a buy?
Growth in gaming has slowed
You can see in the chart below that Las Vegas Sands' revenue and net income have stalled over the past five years. The downturn in Macau that started in 2014 hit both the top and bottom lines hard, and the company still hasn't recovered those losses, despite opening a new resort called the Parisian in Macau.
Macau has returned to growth over the past year, but that's also coincided with the Parisian opening and new resorts from Melco Resorts (NASDAQ:MPEL), Wynn Resorts (NASDAQ:WYNN), and most recently MGM Resorts (NYSE:MGM). That's diluted the market in Macau -- and even as the whole market grows, Las Vegas Sands is losing market share to rivals.
Growth opportunities are few and far between
A decade ago, the gaming industry was being fueled by growth in Asia, particularly Macau. Las Vegas Sands was growing its base of casinos in Macau, riding the wave in the region. Singapore was another new market where Las Vegas Sands won one of just two gaming licenses, building its most profitable resort, Marina Bay Sands.
But in 2018 there aren't many growth opportunities left for large gaming companies. Japan could open up, but there's no guarantee that Las Vegas Sands, or anyone for that matter, will ever build a new resort there. For Las Vegas Sands, there's no other new market that would move the needle, leaving only organic growth from existing markets. As I mentioned, the company is losing market share in Macau, so even existing-market growth doesn't guarantee overall growth for the company.
Value isn't strong for investors today
Considering the limited growth for Las Vegas Sands, I think shares look very expensive today. The stock trades for 20 times earnings and the enterprise value -- which is debt plus equity value -- to EBITDA, a proxy for cash flow, is over 14. Historically, that's not a good value for investors getting into gaming today, and while it's not so expensive that I'm ready to make an underperform call on MyCAPS page, I won't be buying the stock, either.