Las Vegas Sands Corp (LVS, Financial) experienced a daily loss of 1.57%, and a 3-month loss of 20.86%. Despite an Earnings Per Share (EPS) of 0.07, the question remains: is the stock significantly undervalued? This article attempts to answer that question through a comprehensive valuation analysis. We invite you to read on as we delve into the company's financials and future prospects.
Company Introduction
Las Vegas Sands Corp, recognized as the world's largest operator of fully integrated resorts, offers a diverse range of services from casino and hotel operations to entertainment, food and beverage, retail, and convention center operations. With its significant assets spread across Macao, Singapore, and formerly in Las Vegas, the company has made a name for itself in the global hospitality and entertainment industry.
Despite its current stock price of $45.44 and a market cap of $34.70 billion, an analysis based on the GF Value, a proprietary estimate of fair value, suggests that Las Vegas Sands (LVS, Financial) stock may be significantly undervalued.
GF Value Analysis
The GF Value is a unique measure of a stock's intrinsic value, calculated considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value that the stock should ideally be traded at.
According to the GF Value estimation, Las Vegas Sands (LVS, Financial) is significantly undervalued. Given its current price and market cap, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
Assessing the financial strength of a company before investing is crucial to mitigate the risk of permanent loss. A company's cash-to-debt ratio and interest coverage can provide valuable insights into its financial strength. Las Vegas Sands has a cash-to-debt ratio of 0.39, ranking it lower than 54.41% of 827 companies in the Travel & Leisure industry. Its overall financial strength is 4 out of 10, indicating poor financial health.
Profitability and Growth
Consistent profitability over the long term often signals a safer investment. Las Vegas Sands has been profitable 8 over the past 10 years. It had a revenue of $6.80 billion and Earnings Per Share (EPS) of $0.07 in the past twelve months. Its operating margin of 8.74% ranks better than 55.73% of 829 companies in the Travel & Leisure industry. Overall, the profitability of Las Vegas Sands is ranked 7 out of 10, indicating fair profitability.
However, the company's growth is not as promising. Las Vegas Sands's 3-year average revenue growth rate is worse than 88.7% of 770 companies in the Travel & Leisure industry. Its 3-year average EBITDA growth rate is -56.9%, ranking it lower than 94.92% of 610 companies in the industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC) can provide insights into its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. Ideally, ROIC should be higher than WACC. However, for the past 12 months, Las Vegas Sands's ROIC is -96.35, and its cost of capital is 8.5.
Conclusion
Despite its poor financial strength and less than stellar growth, Las Vegas Sands (LVS, Financial) stock is believed to be significantly undervalued. The company's profitability is fair, and its future returns are likely to be much higher than its business growth. For a deeper understanding of Las Vegas Sands stock, you can check out its 30-Year Financials here.
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