Gaming stocks have ridden Macau's incredible growth to outstanding returns since the recession in 2009. At that time, Las Vegas Sands (NYSE:LVS) was on the brink of bankruptcy, Wynn Resorts (NASDAQ:WYNN) had to release an initial public offering of its Macau operations to generate liquidity, and MGM Resorts (NYSE:MGM) was selling assets as well.

But all three have come back strong as Macau has grown, and along with Melco Crown (NASDAQ:MLCO) have led the gaming industry's revival in recent years.

LVS Total Return Price Chart

LVS Total Return Price data by YCharts.

However, the last two weeks have been rough, and the growth narrative may be slowing in Macau.

Are Macau's growth days over?
There's no doubt that Macau's growth has slowed recently. Following years of growth in excess of 50%, growth was 42.4% in 2011, 13.5% in 2012, and 18.6% last year. That broad slowdown has been followed by 15.8% growth so far in 2014 but just 9.3% growth in May, and analysts are now expecting June to be barely positive.

Source: Macau Gaming Inspection and Coordination Bureau. 

There are a few reasons that Macau's growth has slowed recently. Short-term, a ban on smoking in some locations has reduced play and will likely impact the VIP market more than the mass market.

But Macau has also become a $48 billion gaming market and will eventually reach saturation. To put this year's growth into context, China as a whole only expects to grow 7.5%, and the gaming market can't outgrow the economy forever. Eventually growth will slow, particularly as new gaming markets pop up in Asia.

Time to lower expectations
I wouldn't be worried about a weak month or two in Macau, and if stocks fall further it would be a great buying opportunity. But it may be time to adjust expectations. Macau won't grow at twice the rate of the Chinese economy forever, and competition is only heating up in the region.

Lowering expectations to mid-single digits or low double-digit growth is probably more realistic for Macau's gaming market as a whole. So, enterprise value/EBITDA multiples of 12.2 for Melco Crown, 13.1 for Las Vegas Sands, and 12.7 for Wynn Resorts are generous given a slower growth rate. Only MGM is below double digits with a 9.9 multiple.

If gaming stocks fall to single-digit multiples, I think they would be a great buy, even with slower growth expectations. The market is adjusting to downside risk right now, and that's to be expected as growth slows. But keep an eye on the long-term picture as well, because this is still the top gaming market in the world -- and if stocks are cheaper, the cash flow potential for investors is tremendous.