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Why Wynn Won't Win

|Includes:WYNMF, Wynn Resorts, Limited (WYNN)

Recently, a Goldman Sachs strategist identified what he thinks are the most undervalued stocks. One of those, to my surprise, was Wynn Resorts (NASDAQ:WYNN).

Forget the fact that it's trading near its 52-week high (144.99)... or that they have over $7 billion in debt... or that the company reported 2nd qtr 2013 earnings of $1.51 per share on 7/29/13. This missed the $1.57 consensus of the 24 analysts covering the company.

The really frightening news is that the company is excitedly pumping $4 billion into building a new property in Macau. That's right, $4 billion. And that's right, Macau.

Wynn already has a property in Macau, and it did about $300 million in business last year.

By my rough calculations, if the new property does the same numbers (which is a big unknown), it will take over 13 years just to break even.

So here's a question for any reader to ponder: Assuming you had the cash, would you invest $4 billion to earn $300 million a year?

No, neither would I. But in the Wynn's case, the matter is more serious because that $4 billion isn't their money... it's borrowed. So it has to be paid back, presumably with interest. And if their only earning less 8% on their investment, and they have this enormous debt, plus operating expenses, how do they intend to actually make money?

From where I'm sitting, this looks not like a winner, but like a loser.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.