Shares of Las Vegas Sands (NYSE:LVS) stock are down 19% year to date and there are brewing questions about whether a recent slip in Macau's gaming market -- where the company gets most of its revenue -- is a short-term slump or a long-term decline. Third quarter results quelled some fears but for investors the question is whether or not this is a buying opportunity or a dangerous time for the stock?

Las Vegas Sands is still the king of Asia
The best thing Las Vegas Sands has going for it is the markets it serves.

Las Vegas used to be the center of the gambling world, but those days are long gone. Last year Macau generated $45.2 billion in gaming revenue compared to $6.5 billion on the Las Vegas Strip  and that's just the tip of the Asian gambling market. Singapore has just two casinos and is a $6.1 billion gaming market and the Philippines, South Korea, and potentially Japan are expanding gambling. 

The company with the absolute best properties in Asia is Las Vegas Sands. CEO Sheldon Adelson bet his company on a region of reclaimed land in Macau that he called the Cotai Strip, building three megaresorts there with another one under construction. He also won the coveted downtown Singapore gaming bid, building Marina Bay Sands, which now defines the Singapore skyline. 

This dominance in Asia is key because the Asian gaming market is growing rapidly, or it was until recently. This growth was due not only to the growing economy but also Asia's penchant for gambling. You can see this below -- the mass market gaming revenue in Macau has exploded as middle class Chinese have had the means and the infrastructure to get to Macau.

Source: Las Vegas Sands.

Las Vegas Sands' position has resulted in revenue growth of 225% from 2009 to the most recent 12 months. Over that same time frame, EBITDA (which is a proxy for cash flow) has increased nearly five fold. Being the king of Asia pays off.

Primed for new growth opportunities
Las Vegas Sand may be the king of Asia today, but that doesn't mean it's going to allow growth opportunities to go to competitors. The company is building a new resort on Cotai and is aggressively pursuing new opportunities in South Korea and Japan.

Rendering of The Parisian in Macau, Las Vegas Sands' next project. Image source: Las Vegas Sands.

What's interesting is that Sheldon Adelson is using Marina Bay Sands in Singapore as a sales tool to win future bids in Asia. Marina Bay Sands shows off the integrated resort design Adelson has perfected, which brings in conventions and tourists along with gamblers to the resort.

It's this mix of business, entertainment, food and beverage, and gambling that interests countries looking to legalize gambling. They don't want a seedy resort but rather a project that will add value to the community and increase their visitation and international profile. That's what Las Vegas Sands is selling to win new growth projects.

The big risk for Las Vegas Sands
Everything I've covered so far is the good news for Las Vegas Sands. But the bad news is that growth in Asia has hit a brick wall recently. The last four months in Macau have seen revenue declines year over year and October is expected to be another slow month. In Singapore, the company has yet to replicate the profitability experienced in 2011, the first year of operation. At best, the Singapore resort will see flat profits going forward if not a slight decline as other resorts open around Asia.

Without growth it's hard to justify paying a premium for Las Vegas Sands, even if the company owns highly valuable properties. Investors need to put odds on their side if shares are going to be a buy right now.

In gaming the odds are everything
It's great to have a strong market position and solid growth opportunities, but valuation also matters in the gaming industry. We've seen that this year with Melco Crown's (NASDAQ:MLCO) stock underperforming Las Vegas Sands -33% to -22.3% in large part because it started with a higher valuation.

LVS Chart

LVS data by YCharts

To get a feel for valuation I've calculated Las Vegas Sands enterprise value/EBITDA, including pulling out cash that's already on the balance sheet. This gives us a proxy for the value of the entire business (including debt) to its cash flow over the past year.

On that measure, Las Vegas Sands has just a 10.5 EV/EBITDA value, which isn't terribly expensive given that historically this multiple has ranged between 10-15. You can think of this as about a 9.5% return on the company's value before interest and taxes.

That's not a screaming value if Asia's growth days are coming to an end, but it's enough to have me intrigued. I think at today's price the stock is a decent buy but if it falls another 15%-20% it would be a great buy for investors. With that in mind, a half position now with the ability to add more later would be wise.

Also keep in mind that gaming stocks are typically very volatile. Gaming reports that come out every month can swing stocks higher or lower on a moment's notice. But it's the downswings when investors can get in cheap and that's the opportunity I would be looking for in Las Vegas Sands.