Las Vegas Sands (NYSE:LVS) has had a nice post economic crisis recovery off its lows of less than $2 a share, a 30 bagger in just 3 years. That's something to keep in mind for the next market drought as levered casinos will see a significant fall and if they're able to stay afloat, a significant rally after the sell-off. A lot of risk but the reward potential is enormous. However, now, the stock seems to be in the right range as all of the metrics suggest that the stock is about at the ballpark of its fair valuation. However, a pickup in the economy (Chinese and/or American) that's better than expected will lead to valuation adjustments for economic sensitive stocks like casinos and will give it more upside than current valuation metrics suggest.
Recent results suggest that things are going very well for the company. In its Q4 release, the company said that "we are pleased to report record financial results for the fourth quarter and full year of 2011. Strong growth and record EBITDA margin at our Macao property portfolio, together with continued growth at Marina Bay Sands in Singapore and a solid performance from our domestic properties contributed to record revenue, operating income and EBITDA for the quarter." Below is an in depth look at the valuation metrics and stock chart.
Valuation: Las Vegas Sands' trailing 5 year valuation metrics suggest that the stock is undervalued as all of the metrics are below their respective 5 year averages. Las Vegas Sands' current P/B ratio is 5.4 and it has averaged 5.7 over the past 5 years with a high of 21.5 and low of 0.5. Las Vegas Sands' current P/S ratio is 4.5 and it has averaged 4.8 over the past 5 years with a high of 18.7 and low of 0.4.
Price Target: The consensus price target for the analysts who follow Las Vegas Sands is $63. That is upside of 9% from today's stock price of $57.91 and suggests that the stock is overvalued at these levels. This also suggests that the stock has limited upside and should be avoided at its current stock price.
Forward Valuation: Las Vegas Sands is currently trading at about $58 a share with analysts expecting EPS of $3.13 next year, an earnings increase of 21% y/y, for a forward P/E ratio of 18.5. Taking a look at the company's publicly traded comparisons will give us a better idea of the stock's relative valuation. Penn National Gaming (NASDAQ:PENN) is currently trading at about $46 a share with analysts expecting EPS of $2.81 next year, an earnings increase of 14% y/y, for a forward P/E ratio of 16.2. Wynn Resorts (NASDAQ:WYNN) is currently trading at about $129 a share with analysts expecting EPS of $6.93 next year, an earnings increase of 16% y/y, for a forward P/E ratio of 18.6. Melco Crown Entertainment (NASDAQ:MPEL) is currently trading at about $16 a share with analysts expecting EPS of $0.83 next year, an earnings increase of 26% y/y, for a forward P/E ratio of 18.8. The mean forward P/E of Las Vegas Sands' competitors is 17.9 which suggests that Las Vegas Sands is fairly valued relative to its publicly traded competitors.
Earnings Estimates: Las Vegas Sands has beat EPS estimates 2 times in the past 4 quarters. The company's EPS figures have come in between -7 cents and 10 cents from consensus estimates or about -15.9% to 22.7% from analyst estimates. The company has reported earnings that have differed from analyst estimates by a wide margin which suggests that the stock may experience upside from earnings surprises.
Price Action: Las Vegas Sands is up 26% over the past year, outperforming the S&P 500, which is up 5.8%. Looking at the technicals, the stock is currently above its 50 day moving average, which sits at $56.19 and above its 200 day moving average, which sits at $47.66.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.