Las Vegas Sands Corp. (LVS) and Boyd Gaming Corporation (BYD) are two preeminent casino and resort operators based in the United States. LVS operates the Sands Expo and Convention Center in Las Vegas, Nevada and The Venetian Resort Hotel Casino on the Las Vegas Strip. BYD operates through Downtown Las Vegas; Las Vegas Locals; and Midwest & South.
With substantial pent-up demand for gambling, and easing pandemic-related restrictions, investors remain optimistic about the casino industry’s road to recovery. The global gambling market is expected to hit $674.7 billion in 2025, exhibiting a 7% CAGR. With travel and tourism rebounding amid widespread COVID-19 vaccinations, brick-and-mortar casinos are witnessing a decent uptick in player volume. Furthermore, the increasing popularity of online gambling apps—with a growing community of people using their smart devices to connect to online casinos—should propel the industry’s growth. Popular casino operators LVS and BYD are poised to benefit from this backdrop.
BYD stock has gained 126.2% over the past year, while LVS has lost 8.8% over this period. BYD is the clear winner with 31.4% in gains versus LVS’ 32.7% negative returns in terms of year-to-date performance. But which of these stocks is a better pick now? Let’s find out.
Last month, LVS launched an initiative to become a strategic investor in digital gaming technologies and other related offerings. Although this move could enable the company to establish itself as a leader in the industry, digital gaming is still very much in its early stages of development. So, it could be some time before the investment delivers significant returns to its shareholders.
In March, the company agreed to sell its Las Vegas real property and operations for approximately $6.25 billion. LVS remains committed to reinvesting in its Asian operations and other high-growth opportunities in new markets.
In June, BYD entered a strategic partnership with Hawaiian Airlines to offer loyalty members more benefits and rewards with BYD’s B Connected player loyalty program and the airline’s HawaiianMiles program. This collaboration should help BYD grow its membership base across the nation.
Recent Financial Results
During the second quarter, ended June 30, 2021, LVS reported $1.17 billion in net revenue, versus $62 million in the prior-year quarter. Its operating loss came in at $139 million, while net loss amounted to $192 million for this quarter. Also, its adjusted property EBITDA in Macao came in at a negative $13 million. And the company’s loss per share was $0.25 over this period. In addition, its operating expenses rose 60.2% year-over-year to $1.31 billion.
In the second quarter, ended June 30, 2021, BYD’s total revenues rose 325.8% year-over-year to $893.60 million, due to strong revenue growth in Downtown Las Vegas. The company’s property adjusted EBITDAR increased 1,345.5% from the prior-year quarter to $408.98 million, while its operating income came in at $266.34 million. Also, BYD’s net income totaled $113.73 million, compared to a $108.54 million net loss in the prior-year period.
Past and Expected Financial Performance
LVS’ revenue has decreased at a 30.5% CAGR over the past three years. In comparison, BYD’s revenue grew at a 6.8% annualized rate over this period. Also, LVS’ EBITDA has declined at a 73.8% CAGR over the past three years, while the CAGR of BYD’s EBITDA is 20.5% over this period.
The Street expects LVS’ revenue to rise 98.2% in the current year and 55.1% in 2022. The consensus EPS estimates indicate a 106.6% increase in the current year and 1,592.9% increase in 2022. But it’s EPS is expected to decline at a 6.3% rate per annum over the next five years. In comparison, analysts expect BYD’s revenue to increase 41.7% in the current year and 6.7% in its fiscal year 2022. Also, the company’s EPS is estimated to grow by 2,293.3% in the current year and 9.4% next year.
LVS’ trailing-12-month revenue is 1.53 times BYD’s. However, BYD is more profitable, with a 73% gross profit margin versus LVS’ 53.4%.
Also, BYD’s 33.8% EBITDA margin compares favorably with LVS’ 2%.
Thus, BYD is more profitable here.
In terms of forward EV/Sales, LVS is currently trading at 3.14x, which is 136.9% higher than BYD, which is currently trading at 7.44x. Also, its 4.66x trailing-12-month Price/Book is 164.2% higher than BYD’s 12.31x. In addition, BYD’s trailing-12-month Price/Sales and EV/EBITDA ratios of 2.18 and 10.51, respectively, are significantly lower than LVS’ 6.81 and 489.68.
So, BYD is the more affordable stock.
BYD has an overall A rating, which equates to a Strong Buy in our proprietary POWR Ratings system. However, LVS has an overall D rating, which translates to Sell. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
In terms of Quality Grade, BYD has an A, given its higher-than-industry gross profit margin. But LVS’ C Quality Grade is reflective of its lower-than-industry EBITDA margin.
BYD has an A grade for Sentiment, which is consistent with analysts’ expectations that its revenue and EPS will increase. In contrast, LVS has a D grade for Sentiment.
Moreover, BYD has a B grade for Value, which is justified owing to its lower-than-industry valuation multiples. In contrast, LVS has a D grade for Value, which is in sync with the stock’s higher-than-industry valuation multiples.
Of the 31 stocks in the Entertainment – Casinos/Gambling industry, BYD is ranked #1, while LVS is ranked #22.
Beyond what we’ve highlighted, our POWR Ratings system has also rated both BYD and LVS for Stability, Momentum, and Growth. Get all LVS ratings here. Also, click here to see the additional POWR Ratings for BYD.
With the resumption of business in brick-and-mortar casinos and the continued growth of online casinos, the gaming and casino industry is witnessing an accelerated recovery from its pandemic lows. This should allow leading casino operators LVS and BYD to see greater volumes of visitors across all properties. However, BYD’s strategic partnerships and strong results throughout its portfolio should help it perform better than LVS in the near term. Also, BYD’s relative undervaluation and higher earnings growth estimates we think make it a better investment bet now.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to learn about the top-rated stocks in the Entertainment – Casinos/Gambling industry.
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LVS shares were trading at $39.32 per share on Thursday morning, up $0.46 (+1.18%). Year-to-date, LVS has declined -34.03%, versus a 18.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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