MGM Resorts International (NYSE:MGM) raised analyst interest this recent quarter in ways it hasn't done in quite some time. As competitors such as Las Vegas Sands (NYSE:LVS) and Wynn Resorts (NASDAQ:WYNN) were reaping massive profits from Macau over the past few years, with more than two-thirds of their total revenue coming from the Chinese island, MGM Resorts had only 37% of its 2013 revenue from Macau, and so its profits weren't nearly as impressive. But recently, Macau has shown slowing revenue growth, just as Las Vegas has started to show potential for growing again. MGM has been called the best bet on the Las Vegas Comeback, but is the stock a buy right now? Let's take a look.

 
Year

Las Vegas Gross Gaming Revenue ($US)

(Strip + Downtown)

2004 5,996,791
2005 6,687,747
2006 7,319,307
2007 7,460,816
2008 6,708,983
2009 6,074,019
2010 6,269,962
2011 6,565,637
2012 6,716,374
2013 7,005,649
2014 Est. 7,236,327

Las Vegas' 10-year gross gaming revenue. Data: UNLV Center for Gaming Research.

In the company's second-quarter earnings release on Aug, 5. MGM beat analysts' EPS estimates by 75%, reporting $0.21 per share. Revenue of $2.6 billion was 4% higher that the same quarter last year, and revenue from MGM Resorts' U.S. wholly owned resorts was up 6%, with EBITDA at domestic properties up 10% over the same time. The quarter was a definite win for the company, and the stock got a small bump as a result. However, stocks in the gaming industry has been beaten down over the past few weeks as questions about Macau have spooked a lot of investors. As a result, MGM shares are now cheaper than they were before the Q2 release. Does that mean MGM stock is attractively priced?

Is MGM cheap?
At around $23 per share, MGM is priced slightly cheaper than before it announced strong Q2 earnings in early August. The main reason the company's stock is down now is industrywide concern over slowing growth, particularly in the Asian market. Because MGM has less of a bet in Asia, and Las Vegas profits are up, the drop in MGM's stock seems to be a buying opportunity for Foolish investors.

Yet at a price-to-earnings ratio above 85, MGM is still not cheap from a value perspective. Even with some earnings growth expected in 2014 and 2015, if it can keep winning on its Las Vegas strategy, 2015 estimated year-end P/E is still above 30. While the long-term regrowth looks promising, the price right now is hard to support in an industry where other companies with greater profit growth are priced much more attractively.

Better bets in the gaming industry
Las Vegas Sands, regardless of the weaker-than-expected second-quarter numbers, still posted the most profitable quarter of the three gaming companies mentioned above, with net income increasing 27% year over year and revenue up nearly 12% on an annual basis. While Macau growth over the summer has slowed, its certainly hasn't stopped, and Las Vegas Sands posted EBITDA from Macau properties up 21.9% year over year, even through the summer hardships.

Metric

MGM Resorts

Wynn Resorts

Las Vegas Sands

Q1 Net Revenue Growth YOY

12%

9.7%

21.4%

Q2 Net Revenue Growth YOY

4%

6%

12%

Share Price at Sept. 12 Close

$23.77

$182.53

$63.20

P/E (TTM)

87.46

24.69

20.73

Forward P/E

34.8

20.17

15.34

Source: Yahoo! Finance. TTM = trailing 12 months.

As for future growth, MGM is hoping to make fresh gains from Las Vegas, but the company is still making more bets on Macau as well, with its new MGM resort slated to come to the Macau Cotai strip in 2016. The resort will more than double the amount of available rooms the company has in Macau. However, the company will be the last of the major gaming companies to open a new megaresort in the area, and one of the first, Las Vegas Sands, looks to have the best casino on the way.

Mgm Cotai Development
The current progress of the coming MGM resort in Macau. Photo by author, September 2014.

Las Vegas Sands already has the most hotel rooms and gaming revenue on the Cotai Strip, and the opening of its newest resort nearby, The Parisian, will increase that lead even further. With over 3,000 hotel rooms and suites, around 450 table games, 2,500 slots, a retail mall, and a replica of the Eiffel Tower at 50% scale, the resort looks like a much better bet in Macau than MGM, and one that will come online sooner.

Foolish final bet: Is MGM a buy now?
MGM did well in Q2, and its gains should not be downplayed. MGM does look like a good play on an improvement in Las Vegas revenues. With 10 major properties in Las Vegas and growing gaming and non-gaming operations there, MGM stock could be a buy now for investors who really want to play the Vegas comeback.  However, if you can only make one bet in the industry, MGM looks far more expensive and has fewer global growth opportunities than its competitors -- especially Las Vegas Sands.

Bradley Seth McNew owns shares of Las Vegas Sands. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.