Better Casino Stock Buy: MGM or Wynn Resorts?

Editor's note: An earlier version of this article contained an incorrect price-to-book value ratio for Wynn Resorts, which has a negative book value.

The global casino-games market is projected to grow 7% annually through 2027, according to Statista. As the hospitality and gaming industries both recover from the pandemic, let's take a closer look at two casino stocks and determine which is a better buy in today's market.

The case for MGM Resorts International

Coming off its fifth straight record quarter for Las Vegas Strip property earnings, MGM Resorts International (MGM -0.48%) has officially resumed operations in Macau.

During last month's earnings call, MGM CEO Bill Hornbuckle stated "Macau is back" after pandemic restrictions were lifted in early January. Looking ahead, he anticipates "tremendous opportunities for growth" among MGM's regional segments -- with Macau at the top spot.

Meanwhile, MGM's properties on the Las Vegas Strip delivered 27% year-over-year revenue gains and set a new record. Except for the Cosmopolitan and Mirage properties, same-store sales on the Strip improved 11% year over year, and net revenue for Strip properties finished at $2.3 billion last quarter. 

Driven by MGM's non-gaming entertainment offerings, visitation to MGM's Las Vegas properties kept steady throughout the fourth quarter. Year over year, net income attributable to MGM Resorts International increased 117% in Q4 and 17% in all of 2022. 

As for the current quarter, Chief Financial Officer Jonathan Halkyard affirmed, "Demand in Las Vegas remains strong across all segments."  

MGM's management also clarified its stance on pursuing full ownership of BetMGM, currently a 50-50 joint venture between MGM Resorts and Entain. While the company had considered trying to attain the entire online sports betting and gambling entity, MGM's management decided not to pursue it for now.

Investors can now focus on MGM's performance in the recently opened and deeply profitable Macau market. Hornbuckle called MGM China's properties its "highest-earning businesses." A robust Lunar New Year season this past January should produce some encouraging Q1 results.

The case for Wynn Resorts

Posting all-time high property earnings records in Q4, Wynn Resorts (WYNN -0.21%) enjoyed a 51% year-over-year earnings gain at its Las Vegas resort. Q4 adjusted property earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) at Wynn Las Vegas hit $219 million, an 18% improvement over Q4 2021.

For the year, Wynn Las Vegas delivered a record $801 million in EBITDAR -- 51% better than 2021. During Wynn's Q4 earnings call last month, CEO Craig Billings said, "I'm confident that this is an all-time record for a stand-alone Las Vegas Strip property." 

Compared to pre-pandemic 2019, Wynn Las Vegas enjoyed a 69% increase in slot handle, or the amount of money wagered at a casino's slot machines. Aside from gambling, "broad-based strength" was observed across food and beverage, entertainment, and retail segments, according to Chief Financial Officer Julie Cameron-Doe.

While Wynn's Macau operations took a Q4 EBITDAR loss of $59.1 million, the Wynn Macau rebounded in the current quarter, observing a surge of demand during the Lunar New Year period. In fact, Billings said Wynn's Lunar New Year visitation was its "strongest EBITDAR performance since the onset of the pandemic." 

Wynn Macau brought in roughly $4 million in normalized EBITDAR per day during the holiday period. Table drop, or the amount of money exchanged for chips, reached 95% of 2019 levels. 

Although Q4 net revenue dropped 4.6% year over year, Wynn Resorts profited $32 million for the quarter. In Q4 of the year prior, the company took a $177 million loss. While moving in the right direction, Wynn Resorts took a full-year 2022 net loss of $424 million.

Looking ahead, Billings told investors that "forward-looking indicators also remain quite strong despite well-known macro concerns." Indeed, current reservations for Wynn Resorts remain on pace with pre-pandemic levels.

Which stock is the better buy in today's market?

While Wynn Resorts had a profitable Q4, the company was unprofitable in 2022 as a whole. Therefore, to determine which stock makes a better buy right now, I've compared their price-to-sales ratios. 

Data source: Yahoo! Finance.

Since a lower value is generally preferred for a price-to-sales ratio, MGM Resorts International is today's better buy. But don't count Wynn Resorts out. The company has posted impressive revenues and stands to gain from a growing casino market.