Standing out among the Street's worst performers today is Las Vegas Sands, a lodging company whose shares slumped -3.1% to a price of $38.57, 30.14% below its average analyst target price of $55.21.
The average analyst rating for the stock is buy. LVS lagged the S&P 500 index by -3.0% so far today and by -49.9% over the last year, returning -30.9%.
Las Vegas Sands Corp., together with its subsidiaries, develops, owns, and operates integrated resorts in Macao and Singapore. The company is a consumer cyclical company, whose sales figures depend on discretionary income levels in its consumer base. For this reason, consumer cyclical companies have better sales and stock performance during periods of economic growth, when consumers have more of an incentive to spend their money on non-essential items.
Las Vegas Sands's trailing 12 month P/E ratio is 18.1, based on its trailing EPS of $2.13. The company has a forward P/E ratio of 13.7 according to its forward EPS of $2.82 -- which is an estimate of what its earnings will look like in the next quarter. As of the second quarter of 2024, the average Price to Earnings (P/E) ratio for US consumer discretionary companies is 22.15, and the S&P 500 has an average of 28.21. The P/E ratio consists in the stock's share price divided by its earnings per share (EPS), representing how much investors are willing to spend for each dollar of the company's earnings. Earnings are the company's revenues minus the cost of goods sold, overhead, and taxes.
It’s important to put the P/E ratio into context by dividing it by the company’s projected five-year growth rate. This results in the Price to Earnings Growth, or PEG ratio. Companies with comparatively high P/E ratios may still have a reasonable PEG ratio if their expected growth is strong. On the other hand, a company with low P/E ratios may not be of value to investors if it has low projected growth.
Las Vegas Sands's PEG ratio of 1.21 indicates that its P/E ratio is fair compared to its projected earnings growth. Insofar as its projected earnings growth rate turns out to be true, the company is probably fairly valued by this metric.
To deepen our understanding of the company's finances, we should study the effect of its depreciation and capital expenditures on the company's bottom line. We can see the effect of these additional factors in Las Vegas Sands's free cash flow, which was $2.21 Billion as of its most recent annual report. The balance of cash flows represents the capital that is available for re-investment in the business, or for payouts to equity investors as dividends. The company's average cash flow over the last 4 years has been $462.83 Million and they've been growing at an average rate of -5.2%. LVS's weak free cash flow trend shows that it might not be able to sustain its dividend payments, which over the last 12 months has yielded 2.0% to investors. Cutting the dividend can compound a company's problems by causing investors to sell their shares, which further pushes down its stock price.
Value investors often analyze stocks through the lens of its Price to Book (P/B) Ratio (its share price divided by its book value). The book value refers to the present value of the company if the company were to sell off all of its assets and pay all of its debts today - a number whose value may differ significantly depending on the accounting method. Las vegas sands's P/B ratio is 7.56 -- in other words, the market value of the company exceeds its book value by a factor of more than 7, so the company's assets may be overvalued compared to the average P/B ratio of the Consumer Discretionary sector, which stands at 3.11 as of the second quarter of 2024.
Since it has a Very low P/E ratio, a higher than Average P/B Ratio, and positive cash flows with a downwards trend, Las Vegas Sands is likely overvalued at today's prices. The company has poor growth indicators because of a negative PEG ratio and decent operating margins with a stable trend. We hope you enjoyed this overview of LVS's fundamentals. Be sure to check the numbers for yourself, especially focusing on their trends over the last few years.
