It was a great day for Las Vegas Sands investors, who saw their shares rise 12.4% to a price of $39.87 after China eased travel restrictions to South East Asian gambling destination Macao. At these higher prices, is the company still fairly valued?
Las Vegas Sands Corp., together with its subsidiaries, develops, owns, and operates integrated resorts in Asia and the United States. The company belongs to the Consumer Cyclical sector, which has an average price to earnings (P/E) ratio of 24.11 and an average price to book (P/B) ratio of 3.11. In contrast, Las Vegas Sands has a trailing 12 month P/E ratio of 16.5 and a P/B ratio of 7.3.
P/B ratios are calculated by dividing the company's market value by its book value. The book value refers to all of the company's tangible assets minus its liabilities -- meaning that intangibles such as intellectual property, brand name, and good will are not taken into account. Traditionally, a P/B ratio of around 1 shows that a company is fairly valued, but owing to consistently higher valuations in the modern era, investors generally compare against sector averages.
Las Vegas Sands has a 52 week high of $48.27 and a 52 week low of $28.88. The company has moved -6.4% over the last year compared to -16.9% for the S&P 500 -- a difference of 10.5%. While it has an attractive P/E ratio, the company's P/B ratio is well above industry averages. For this reason, value investors may want to wait on the sidelines for now.
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