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Only lazy people value companies with P/E ratios. Take the time to look at all three statements or else you'll miss real opportunity.

A great example lies in the casino industry, comparing Caesars Entertainment (NASDAQ:CZR) and Wynn Resorts (NASDAQ:WYNN). With a market cap over $11 billion, Wynn has profited over the last several years from high-end individual bets on upscale venues, particularly in China, which has allowed Steve Wynn's empire to grow while former titans such as MGM fall. However, as Chinese economic woes stalk the headlines this year, Wynn's stock price has struggled due to its large revenue allocation to Macau (70+%).

Caesars, at $1.5 billion market cap, has had a rocky start to its IPO so far this year. Formerly Harrah's Entertainment, the company has historically focused on smaller bets across an array of regional casinos in the U.S., with the exception of the flagship Caesars property acquired in 2004. Earlier this year, Caesars acquired Israeli-based mobile gaming company Playtika, which has thrived on Apple's (NASDAQ:AAPL) iOS platform and represents a foothold for future gambling on mobile devices.

On an operating level, the two companies are somewhat similar, with Wynn pulling in LTM EBITDA of $1.4 billion and Caesars earning $1.7 billion, both with relatively stagnant revenue growth.

But the cash flows and balance sheets are where these two companies truly differ. While Wynn has been cash flow positive over the last 4 quarters with $1.3 billion of free cash flow, Caesars has lost $344 million of cash flow over that period (and has had negative cash flow over the last three fiscal years). Even more important, Caesars is carrying over $19 billion of total debt on its books with only $1.5 billion of market equity, putting them at risk of financial distress. Wynn, on the other hand, has only $5 billion of debt on $11+ billion of market equity.

All told, Caesars' total enterprise value (the value you should care about) is $21 billion versus $17 billion for Wynn, which means that Caesars is actually valued higher than Wynn despite a considerably worse financial position and trailing cash flow. Unless you think the Chinese economy will completely collapse and swallow Macau with it, this imbalance seems unsustainable, making Wynn a great value at Caesars' expense.

I do believe there is tremendous market potential for the gaming industry as U.S. laws loosen and allow companies to bring gambling online and on mobile. However, if you want to remain market neutral, then buy Wynn and short Caesars.

(click to enlarge)WYNN, CZR stock price since IPO

Source: Casino Stocks: Buy Wynn, Short Caesars