Las Vegas Sands Could Be Undervalued In The Market

| About: Las Vegas (LVS)

Las Vegas Sands (NYSE:LVS) is a major competitor on the Las Vegas strip, and the company has four casino hotel resorts in the U.S. and five resorts in Asia. Business continues to be encouraging in Macau, and of course, the picture is looking brighter in the U.S. for this year versus last. The story here is that Las Vegas Sands looks undervalued in my opinion, using several valuation approaches.

First, if you apply its present trailing 12 months P/E ratio of about 29.68X to my 2013 and 2014 earnings per share estimates of $2.70E and $3.10E, respectively, you would arrive at two target stock prices of about $80E per share and about $92E per share, respectively. (Estimates are denoted by an E following the number.)

Second, using its current stock price of about $55 per share and its dividend per share of $1.40, its dividend yield is about 2.55%. Taking the reciprocal, or 1/2.55%, this would imply a multiple on the dividend of 39.29X. A multiple of 39.29X times my $2.43 net cash flow per share estimate would indicate a target share price of about $95E. (Net cash flow is operating cash flow of about $885 million in Q4 2012 minus capital spending of about $384 million for that same period, or about $501 million for the quarter, or about $2E billion on an annualized basis, or about $2.43E per share on about 823 million shares outstanding.)

Third, if you plug my $2.43E cash flow per share estimate into the Dividend Discount Model, the calculations could look something like this: A target price of about $65E = $2.43E/[(1.72*13.74%)-19.92%]. This calculation is based on the stock's beta from Yahoo Finance of 1.72; an expected total return on the market being the same as the total return on the Standard and Poor's 500 Index of about 13.74E% for the last 12 months; and my estimate of its earnings growth rate of about 19.92E%. My estimate of future earnings growth is the average of its growth estimate for the next five years 12.10%E from Yahoo Finance and its average revenue growth for the last two years of about 27.73%E.

Based on these calculations, I consider Las Vegas Sands to be attractively priced in the market at these levels.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.