Las Vegas Sands (LVS) Has A Brighter Future Than Other Casino Stocks

Big casino companies may seem similar, but they differ in important ways. Some of them are holding onto a lot of cash that makes it easy for them to expand. Others are paying down debt or finding other ways to improve their existing businesses. Sheldon Adelson’s company, Las Vegas Sands, suffered a hard loss when Adelson died at the beginning of 2021. However, he’s left his company in the capable hands of a team that’s worked with him for decades.

The new CEO and Chairman, Robert Goldstein, also has tentative expansion plans. Adelson considered expanding into sports betting and new markets. On the Q4 earnings call, Goldstein admitted they were tentatively looking into online sports betting, among other ideas. This suggests plans to continue expansion plans.

Overall, Las Vegas Sands is better prepared to bring these expansions to life than some of its largest competitors. Compared to them, Las Vegas Sands can:

  • Pay short-term debt more easily.
  • Use its assets to generate sales more effectively.
  • Spends investor money better than its competitors.

We don’t have to sift through years of news reports to put this puzzle together, either. We get the numbers to draw these conclusions every year.

What The Numbers Tell Us

Don’t worry. We won’t make you read the financial statements and interpret the ratios. We’ve done that already. But we do have to tell you which numbers we used.

We pulled financials from 2019. Some of our comparison companies haven’t posted their 2020 numbers yet. However, the 2019 numbers give us an idea about how these companies will compare during normal times. They’re more likely to represent these companies’ long-term capabilities than the pandemic years will.

Short Term Debt

Although casino developers often carry long-term debt, they have important short-term debts to cover. Debt items like construction loans can often be short-term. So, the ability of casino developers to cover these high-interest loans and similar liabilities is critical. We can compare current ratios to see how well different casino developers can cover them.

The current ratio tells us how well companies can cover short-term debts. The current ratio is current assets divided by current liabilities. That’s business-speak for cash and stuff you can turn into cash divided by debt you have to pay off within a year. However, knowing that number is not enough. We also need to know how much of those current assets are cash. The difference between cold hard cash and an ‘other current asset’ may be months of trying to turn a cash equivalent into real money.

So, a strong casino development company should have:

  • A high current ratio.
  • A high cash percentage.

Here’s how our companies stack up:

 Las Vegas SandsMGM ResortsPenn National GamingCaesars Entertainment
Current Ratio1.651.260.710.88
Cash percentage80.0%58.1%68.1%40.4%

Las Vegas Sands the highest current ratio and the highest ratio of cash to total current assets. Out of these four companies, we’d expect it to have the easiest time paying off short-term debt. In contrast, Penn National Gaming and Caesars Entertainment may have a harder time. Additionally, Penn and Caesars’ current ratios are more volatile, suggesting risk that’s absent from Las Vegas Sands and MGM.

Efficient Use Of Assets And Equity

If you set up a 401k for your kid, you’d be thrilled if they invested and didn’t touch that account until they were 65. If you set up a 401k for your kid and they spent the money on a college pizza party, you’d get a new kid. Investors feel similarly about the companies they invest in. They want to see companies use their money well–whether it’s with investor money or debt.

We have two numbers that can give us an idea about how well our companies use their money. Return on Equity tells us how well companies are spending investor money. Return on Assets (ROA) tells us how well companies are using assets they own to make money. Between these two ratios, we can get a pretty good idea about which companies are delivering for their shareholders. Again, higher is better. Here’s how our companies compare:

 Las Vegas SandsMGM ResortsPenn National GamingCaesars Entertainment
ROA14.26.50.31.4
ROE50.817.52.37.3

Again, Las Vegas Sands takes the lead in both categories. For every $1 investors put in, Sands generated just over 50 cents in profit. Las Vegas Sands’ assets–what it bought and owns–made about 14 cents for every dollar spent on them. That blows the rest of the competition out of the water–especially poor Penn National Gaming. Compared to the competition, money invested in or used by Las Vegas Sands goes further and returns more profit for the company and its shareholders. It’s the mark of a well-managed company.

Las Vegas Sands’ Outlook

These ratios only give us a snapshot of these companies. To compare them properly, we used the same set of numbers from 2019. 2020 will be a strained year for all of them, but we can predict that Las Vegas Sands weathered the pandemic the most effectively. MGM Resorts will probably come out alright, too. However, Penn National Gaming and Caesars Entertainment may struggle. The 2020 numbers will tell whether these predictions play out.

But we like surprises.

Being able to pay off short-term debt is a promising sign for companies like these. It shows reliability during the casino construction phase. High ROA and ROE show how well these companies spend their own and investors’ money. Las Vegas Sands shows promise in these early indications of financial health.

Critically, its financials are better than some of its largest competitors. It’s not only well-positioned to act on plans it has to expand. Las Vegas Sands is bettor positioned to make competitive gains in the marketplace. 2020 may shake Las Vegas Sands from the top of the market. But despite losing its founder, there’s good reason to be optimistic about Las Vegas Sand’s future.

About the Author

Chris Gerlacher

Christopher is a sports betting enthusiast and online gaming expert from Colorado Springs.