Is This Really the Best Gaming Stock Around?

There may be stormy weather ahead for the market. A long weekend didn't give investors much of a vacation, as ADP's employment numbers on Thursday presaged a worse report from the Bureau of Labor Statistics. In wobbly times like these, it becomes even more important to do some homework on the companies you own or have your eyes on. Those that can outperform in the future often leave a trail of positive signals in the past. With that in mind, let's take a look at Las Vegas Sands (NYS: LVS) to find out if it fits the bill for future success.

Checking the numbers
Las Vegas Sands has been one of the past year's best performers, gaining almost 35% since last April. On a longer timeframe, its stock growth seems positively anemic next to the gains made in some key metrics:

LVS Total Return Price Chart by YCharts.

With that in mind, let's take a look at some of the company's most recently reported numbers to determine what's behind this discrepancy:


Most Recent Result

Annual Revenue$9.41 billion
Annual Net Income*$1.42 billion
Profit Margin15.0%
EBITDA$3.53 billion
Dividend Yield1.7%
Market Cap$43.0 billion
Price to Earnings Ratio37.7
12-Month Stock Price Growth34.6%
Most Valuable PropertyThe Venetian Macao
Fastest-Growing PropertyMarina Bay Sands

Sources: Yahoo! Finance, Morningstar, Google Finance, and corporate 10-K filing.
* Net income available to common shareholders.

Solid growth
Right off the bat, there doesn't appear to be anything unusual about Sands' brisk growth rate -- profit margins shot up over the past year, with revenue and EBITDA (earnings before interest, taxes, depreciation, and amortization) also seeing solid gains in 2011. However, growth slowed over the final quarter, but not enough to slow the stock's rise, as it's the best-performing gaming stock (tied with Melco Crown (NAS: MPEL) ) since that earnings release.

Sands' Venetian casino in Macau only barely avoided losing the MVP crown to the Sands in Marina Bay, the company's Singapore casino that's more than doubled its revenue over the past year. Meanwhile, revenue in Las Vegas was lower than in 2010, bucking the trends of increased Vegas travel volumes and more gaming wins.

Asian expansion
Las Vegas, however, has never been Sands' big moneymaker. The company's three properties in Macau drove much of its gaming revenue, as did its flagship Singapore property; that looks set to continue in 2012 with the opening of Sands Cotai Central. The novelty factor ought to give the company a boost over aggressive rivals Wynn Resorts (NAS: WYNN) and MGM Resorts (NYS: MGM) , which have both pushed Macau toward critical mass by opening resorts to compete with Sands and Melco Crown.

The city has seen amazing growth in gaming revenues over the past three years, but resident Fool gaming analyst Travis Hoium expects that to slow down as casinos saturate the area. That makes 2012 an important year for Sands, as its stock is already bumping up against a much higher P/E than any of its Macau competitors. The only company without another potential Macau site is MGM, so Sands is hardly alone in the race for more space.

Another potential opportunity is a yet-to-be-finalized "EuroVegas" in Spain, which could be a $20 billion development with an incredible amount of casino capacity. This expansion makes no sense to me now, and I doubt that view will change much in the coming years. Spain has one of the worst unemployment levels in Europe and its economy has fallen on hard times under the boot heel of austerity. Much of Europe is in a similar boat.

There are emerging economies where such a massive development might work, but Europe has long-term headwinds aplenty, from anemic birth rates to pension problems to the potential splintering of the Eurozone. Don't expect this to be the rocket that sends Las Vegas Sands to the stratosphere.

Foolish final thoughts
A forward P/E of 18.95 seems much more reasonable, and the company might make even more than expected if Cotai Central is a big hit. But it's also worth keeping in mind the competition, to say nothing of an ill-conceived move into a region in economic tailspin. I wouldn't count Las Vegas Sands out before the new casino opens, but that may already be baked into the stock's price, which has already far outpaced its peers since the recession ended:

LVS Total Return Price Chart by YCharts.

You should definitely keep your eye on Las Vegas Sands by adding it to your watchlist. I'm not fully sold on the company at its current price, but I can't see any reason why it would suddenly tank, either. There is one stock that hasn't been mentioned here with a lot of room to grow -- The Motley Fool's top stock of 2012. You can find out everything you need to know in our brand-new free report. Click here to claim your copy now.

At the time this article was published Fool contributorAlex Planesholds no financial position in any company mentioned here. Add him onGoogle+or follow him on Twitter@TMFBigglesfor more news and insights. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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