Image source: Las Vegas Sands.

The gaming industry has faced a lot of headwinds since 2014 when the Macau market started to fall apart. Since its peak, monthly gaming revenue is down about 50% and gaming stocks have taken a beating as well. Wynn Resorts (NASDAQ:WYNN) has taken the brunt compared to Las Vegas Sands (NYSE:LVS), but both stocks have struggled. Today, which one is a better buy for you?

LVS Total Return Price Chart

LVS Total Return Price data by YCharts.

Value in gaming still matters
The first place to start when comparing Las Vegas Sands and Wynn Resorts is with valuation. The best way to look at these stocks is by comparing enterprise value (market cap plus net debt) to EBITDA to get EV/EBITDA.

I outlined the general numbers last month and today Las Vegas Sands' has an EV/EBITDA ratio of 11.2 and Wynn has a ratio of 14.2. That makes it look like Wynn Resorts is far more expensive, but it doesn't quite tell the whole story.

New resorts will change everything
What will change for both Las Vegas Sands and Wynn Resorts is the new resort in Macau that they'll open in the next year. For Wynn, this will add to only two resorts the company operates and could double its revenue overall. Las Vegas Sands is a much larger company and has six major resorts, four of which are in Macau. So, on a percentage basis, Wynn's new resort will have a much bigger impact.

If we assume that both new properties just add $1 billion in EBITDA, akin to what similar-sized neighboring resorts generate, the valuations change a lot. Las Vegas Sands would have an EV/EBITDA ratio of 9.0 and Wynn Resorts' ratio would be 7.7. That's what I mean when I say that today's ratio doesn't tell the whole story.

Wynn Las Vegas is the only property the company has in operation in the U.S. Image source: Wynn Resorts.

The big question facing these companies
If Macau starts to grow again, even a little bit, I think it's clear that Wynn Resorts will be the best stock for investors long term. It would benefit immensely from adding a single resort to its portfolio and growth in Macau would ensure that Wynn Palace will indeed add a lot of EBITDA. But a decline in Macau's revenue will have a magnified impact on the high end of the market, as Wynn has already seen.

If Macau doesn't grow, Las Vegas Sands has a more diverse business. Marina Bay Sands in Singapore is actually its most profitable property, and its mass market strategy in Macau has paid dividends because the mass market has fallen less than VIP over the past two years.

The bottom line
I think Macau is at its bottom and will recover over the next five years. For that reason, I think Wynn Resorts is the better buy today. But if Macau doesn't recover, it could easily be outperformed by Las Vegas Sands. But that's the gamble in gaming stocks.