Las Vegas Sands Corp (LVS, Financial) has recently experienced a daily loss of 4.36%, and a 3-month loss of 18.08%. Despite this, its Earnings Per Share (EPS) stands at 0.07. This raises the question: is the stock significantly undervalued? In this analysis, we delve into the valuation of Las Vegas Sands (LVS) to answer this question. Read on to discover our findings.
Company Introduction
Las Vegas Sands is the world's largest operator of fully integrated resorts, featuring casino, hotel, entertainment, food and beverage, retail, and convention center operations. The company owns several major resorts in Macao and Singapore, and is expected to open a fourth tower in Singapore in 2028. After selling its Las Vegas assets in 2022, the company now generates all its EBITDA from Asia, with its casino operations generating the majority of sales.
Given the current stock price of $45.82 and the GF Value of $90.04, the stock appears to be significantly undervalued. This valuation provides a compelling starting point for a deeper examination of the company's intrinsic value.
GF Value Explained
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. This GF Value Line provides an overview of the fair value at which the stock should ideally be traded.
If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, the stock is undervalued and its future return will likely be higher. At its current price of $45.82 per share, Las Vegas Sands stock shows every sign of being significantly undervalued.
Given that Las Vegas Sands is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, investors must review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are great ways to understand its financial strength.
Las Vegas Sands has a cash-to-debt ratio of 0.39, which ranks worse than 54.84% of 826 companies in the Travel & Leisure industry. The overall financial strength of Las Vegas Sands is 4 out of 10, indicating that its financial strength is poor.
Profitability and Growth
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. A company with high profit margins is also typically a safer investment than one with low profit margins. Las Vegas Sands has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $6.80 billion and Earnings Per Share (EPS) of $0.07. Its operating margin is 8.74%, which ranks better than 55.62% of 827 companies in the Travel & Leisure industry. Overall, GuruFocus ranks the profitability of Las Vegas Sands at 7 out of 10, indicating fair profitability.
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term performance of a company's stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Las Vegas Sands is -30.1%, which ranks worse than 88.53% of 767 companies in the Travel & Leisure industry. The 3-year average EBITDA growth rate is -56.9%, which ranks worse than 94.89% of 607 companies in the Travel & Leisure industry.
ROIC vs WACC
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Las Vegas Sands's return on invested capital is -96.35, and its cost of capital is 8.35.
Conclusion
In conclusion, the stock of Las Vegas Sands (LVS, Financial) shows every sign of being significantly undervalued. The company's financial condition is poor and its profitability is fair. Its growth ranks worse than 94.89% of 607 companies in the Travel & Leisure industry. To learn more about Las Vegas Sands stock, you can check out its 30-Year Financials here.
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