Publicly Traded Online Casinos

As one of the top online casinos in New Jersey, the Golden Nugget’s application to sever its online casino arm from its land-based casino business has finally been approved by the New Jersey Casino Control Commission (NJCCC). After hearing from two company executives in last week’s 90-minute hearing, the NJCCC Review Team of Chairman, James T. Plousis granted the new casino. That said, below are the 5 largest publicly traded casino companies to watch for future investment plans. Las Vegas Sands Corporation At the top of the list is a company that has been in existence for the past 30 years. It is the largest casino company in the world, with annual revenue of $14 billion.

The early days of online gambling were like the Wild West in some respects. Legislation and regulation were nonexistent and pretty much anyone with the technical know-how could set up a gambling site and take wagers from people around the world. Some of these sites were run by reputable businessmen while others were most likely run by the mafia.

Those days are mostly behind us and the industry is increasingly dominated by legitimate corporations complete with boards of directors, publicly-available financial statements and a willingness to pay their taxes. It’s true there are pros and cons when dealing with corporations, but I think we can all agree they tend to be stable providers of services.

It’s always safer to gamble with publicly traded betting sites. Companies such as these have an actual legal presence in their home countries. They are open to scrutiny, regulated and are subject to the law of the land. Most importantly, there is transparency.

Additionally, all publicly traded gambling sites have licenses to operate in their respective nations. This is important because it means someone is watching to make sure they play by the rules. Corporations can be irritating, slow and even stupid sometimes, but they very rarely outright steal from their customers. I’ll admit it. I’m sold on publicly traded betting sites.

If you’re not a player, perhaps you have an interest in investing in online gambling. After all, the industry still has a lot of room to grow. There are a number of huge markets (such as the USA and parts of Asia) that are severely underserved. I’m not one to give out investment advice, so all I’ll say is there are some real opportunities in internet gambling.

Both in terms of better performance of individual operation as well as optimizing the number of staff employed to undertake the work.These qualities make the system a comprehensive tool for effective management of gaming devices and casino employees as well as excellent tool for effective guest service at the casino.Ensico’s Slot Management System is made to fit legislative standards in individual jurisdictions. Slot machine player tracking system. High reliability and attention to detail of the system enables optimization of all work processes.

One last thing – this is a work in progress. There are dozens of big and small publicly traded betting sites, software suppliers and others involved in the industry. The plan is to start with the biggest names in gambling and expand it from there.

888.com

Gambling Brand: 888

Primary Website: www.888.com

Company Name: 888 Holdings, PLC

Corporate Website: http://www.888holdingsplc.com/

Stock Information: http://finance.yahoo.com/q?s=888.L

Description: 888 Holdings was founded in 1997 and has operated a number of highly successful gambling, poker and betting websites over the years. At one point, 888 operated Casino-On-Net, Reef Club Casino and Pacific Poker. All of these were successful ventures during the early days of online gambling.

Now 888 is primarily known for its 888-branded products as 888.com, 888Ladies, 888Bingo and 888Poker. All of its products are available through its primary website, 888.com. 888 currently operates under a gambling license in Gibraltar. The company has served millions of players from around the world.

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888.com does not accept customers from the United States but one of its subsidiaries does have an operating agreement with Caesars to host online poker in the regulated markets of New Jersey and Nevada. If online poker is legalized in more states, we can expect to see 888 continue its expansion in the US market.

Caesars Entertainment

Gambling Brand: Caesars

Primary Website: www.wsop.com

Other Websites: www.caesarscasino.com, www.harrahscasino.com

Company Name: Caesars Entertainment

Corporate Website: https://www.caesars.com/corporate/

Stock Information: http://finance.yahoo.com/q?s=CZR

Description: The Caesars name is primarily associated with brick-and-mortar gambling in the United States and abroad. However, the company has made moves into the online space in regulated markets in the US. Caesars is currently teamed up with 888 Holdings (see above) to offer online poker in Nevada and online poker and gambling in New Jersey.

888 and Caesars jointly operate WSOP.com (NV and NJ), CaesarsCasino.com (NJ) and HarrahsCasino.com (NJ). At the time of this writing, Caesars stock isn’t doing so well due to $8.57 billion in revenue offset by $24.68 billion in debt.

In total, Caesars operates more than 50 properties with nearly 43,000 hotel rooms, 3 million square feet of gaming space, 57,000 slot machines and 3,595 table games.

William Hill

Gambling Brand: William Hill

Primary Website: www.williamhill.com

Company Name: William Hill, PLC

Corporate Website: http://www.williamhillplc.com/

Stock Information: http://www.bloomberg.com/quote/WMH:LN

Description: William Hill is an old name in gambling. It was established in 1934 in the UK and has since grown to become one of the largest bookmakers in the world. William Hill operates 2400 physical betting shops in the UK in addition to its flagship enterprise, WilliamHill.com.

WilliamHill.com hosts 500,000 betting opportunities every week in addition to its casino gambling, poker, bingo and skill game options. Altogether, the company employs 17,000 people in nine countries. In 2012, William Hill moved into Nevada when it purchases three sportsbook chains. This latest move places 55% of all Nevada sportsbooks under the William Hill umbrella.

Bwin.Party

Gambling Brand: Bwin.Party

Primary Website: www.partypoker.com

Other Websites: www.partybets.com, www.partycasino.com, www.gamebookers.com, partybingo.com, foxybingo.com

Company Name: Bwin.Party Digital Entertainment

Corporate Website: http://www.bwinparty.com/

Stock Information: http://finance.yahoo.com/q?s=BPTY.L

Description: Bwin.Party is the result of a 2011 merger between Party Gaming and Bwin Interactive Entertainment. Each original company was successful in its own niche in online gaming. Party Poker was launched in 2001 and eventually became the first mega poker site in history. It turned its founder into a billionaire and changed the shape of online poker from that point on.

Bwin was founded in 1997 and grew to become a major force in online sports betting, eventually getting to the point where it was processing several hundred million bets per year. Bwin developed the concept of “in play” betting which allowed customers to place on sporting events in real time after the start of the match.

The two companies merged in 2011 to form Bwin.Party. The company now operates primarily under the “Party” name. Their portfolio of betting sites offers online poker, sports betting, casino games and bingo to millions of customers around the world. Bwin.Party holds licenses in Gibraltar, Italy, France, Argentina, Mexico, Austria, Kahnawake, South Africa, Alderney and Germany.

Bwin.Party also operates in New Jersey in conjunction with Borgata to offer licensed online gambling and poker in NJ. The partnership operates the websites nj.partypoker.com, poker.theborgata.com and casino.theborgata.com. Bwin.Party is also exploring licensing options for online poker in Nevada.

Betsson

Gambling Brand: Betsson

Primary Website: www.betsson.com

Other Websites: www.betsafe.com, www.casinoeuro.com, cherrycasino.com, krooncasino.com, nordicbet.com, oranjecasino.com

Company Name: Betsson AB

Corporate Website: http://www.betssonab.com/en/

Stock Information: http://www.bloomberg.com/quote/BETSB:SS

Description: Swedish company Betsson has existed in some form or another for more than 50 years. The first iteration of the company was formed in 1963 under the name AB Restaurang Rouletter From there, the company got involved with various aspects of gaming. At various points, the company supplied slot machines to restaurants in Sweden, operated slots in Eastern Europe and acquired technology to provide casino games over the internet.

Today, Betsson AB operates 7 online gaming sites with Betsson.com and Nordicbet.com being the two largest. Players can play poker, bet on sports, play casino games, play poker and bet on financial instruments. Betsson is licensed in Malta and employs nearly 1,000 people.

BSkyB

Gambling Brand: Sky Betting and Gaming

Primary Website: ww.skybet.com

Other Websites: www.skybingo.com, www.skypoker.com, www.skyvegas.com

Company Name: British Sky Broadcasting Group, PLC

Corporate Website: http://corporate.sky.com/

Stock Information: http://www.bloomberg.com/quote/BSY:LN

Description: Sky Betting and Gaming is a subsidiary of the British Sky Broadcasting Group (BSkyB). BSkyB is the UK’s largest paid television service with 11 million active subscribers and total revenue exceeding £7.5 billion. The parent company operates numerous subsidiaries in the telecommunications industry. This includes cable TV, internet, wireless communication and phone services.

Paddy Power

Gambling Brand: Paddy Power

Primary Website: www.paddypower.com

Company Name: Paddy Power, PLC

Corporate Website: http://www.paddypowerplc.com/

Stock Information: https://uk.finance.yahoo.com/q?s=PLS.IR

Description: Paddy Power is Ireland’s largest online bookmaker and one of the largest in the world. The Paddy Power website offers customers online sports betting, poker, casino games, bingo, virtual sports and more. They also operate several hundred brick-and-mortar betting shops across the UK, Ireland and Northern Ireland.

Paddy Power is also known as a kind of mischief-maker. They’re always getting in trouble with the UK’s advertising authority for airing controversial advertisements. Despite the lighthearted approach to marketing, PaddyPower.com is a serious contender in the online betting industry.

Betfair

Gambling Brand: Betfair

Primary Website: www.betfair.com

Company Name: Betfair Group, PLC

Corporate Website: http://corporate.betfair.com/

Stock Information: http://www.bloomberg.com/quote/BET:LN

Description: Betfair is best known for its development of the world’s first mainstream betting exchange. An exchange works differently than a traditional sportsbook because the it allows customers to bet against one another rather than against the book. Customers can “back” or “lay” outcomes at prices that are dictated by the market. It’s sort of like options trading.

This style of wagering is beneficial to customers and Betfair alike. Customers usually get better odds at an exchange while Betfair doesn’t take any of the risk. Betfair takes a small commission no matter what happens. The Betfair Group also operates a traditional online sportsbook and an online casino.

Ladbrokes Coral

Gambling Brand: Ladbrokes Coral

Primary Websites: www.ladbrokes.com and www.coral.co.uk

Company Name: Ladbrokes Coral Group PLC

Corporate Website: https://www.ladbrokescoralplc.com/

Stock Information: London Stock Exchange: LCL

Description: Online betting giants Ladbrokes and Coral completed their merger and debuted on the London Stock Exchange in November of 2016.

Ladbrokes is an ancient gambling brand founded in 1886. The name “Ladbrokes” was born in 1902 and the company has grown to dominate today’s betting industry. The company employs more than 14,000 people and operates more than 2800 physical betting shops in addition to its online presence.

Prior to the merger, the Gala Coral Group ranked as the UK’s largest bingo operator and third-largest bookmaker with a strong presence both online and in the real world. The merger of the two companies is expected to provide the new group with cost synergies in excess of £65 million. The new group will also now rank as the largest licensed betting estate in the UK. Competition concerns required the new group to give up on 360 shops, but Ladbrokes Coral still maintains roughly 3600 physical betting shops.

Churchill Downs

Gambling Brand: Churchill Downs

Primary Website: www.twinspires.com

Other Websites: www.churchilldowns.com

Company Name: Churchill Downs Incorporated (CDI)

Corporate Website: http://www.churchilldownsincorporated.com/

Stock Information: http://www.nasdaq.com/symbol/chdn

Description: Churchill Downs is best known for its horse racing presence in the United States. CDI owns the Kentucky Derby and the Kentucky Oaks horse racing events in addition to the bet-from-home website Twin Spires.

Churchill Downs also operates a number of racetracks in the US, a resort casino in Mississippi and a video poker business in Louisiana. They have their hands in a little bit of everything with a total market cap of more than $1.6 billion.

Amaya Gaming

Gambling Brands: Amaya, PokerStars and Full Tilt Poker

Corporate Website: www.amaygaming.com

Other Websites: www.pokerstars.com, www.fulltiltpoker.com

Stock Information: http://www.bloomberg.com/quote/AYA:CN

Description: Canada-based Amaya Gaming that develops and implements gambling software for casino providers. They have a portfolio of hundreds of slot machines, table games, poker software and sports betting platforms that they provide to those who operate online or land-based casinos.

The company made big news in 2014 when it completed a $4.9 billion acquisition of the parent company of PokerStars and Full Tilt Poker. Before that deal, Amaya was relatively unknown to the general public as it operates on a business-to-business model.

Amaya Gaming appears to have a bright future. They have made a number of notable purchases in addition to PokerStars and Full Tilt. They purchased the Ongame Network (online poker) and Cadillac Jack (technology and equipment provider to land-based gaming operations in North America) in 2012.

Amaya is now pursuing licenses to offer online poker through PokerStars in New Jersey. If Amaya is successful in penetrating the US market, they will be in prime position to make a lot of money. This is a stock worth keeping an eye on.

Updated on September 14th, 2020 by Bob Ciura

As the saying goes, the house always wins. Casinos operate strong business models, as casinos earn a virtually guaranteed profit from the sum of the bets they receive. The relatively attractive economics of casinos make the industry worthy of a closer look.

Investors may be particularly intrigued by the earnings growth and dividends of the major casino stocks. The 4 major publicly-traded casino stocks all pay dividends to shareholders, but they are far from the safest dividend stocks around.

If you are looking for a safer basket of dividend growth stocks, consider the Dividend Aristocrats. They are an elite group of 65 stocks in the S&P 500 Index with 25+ years of rising dividends.

You can download an Excel spreadsheet of all 65 Dividend Aristocrats (with important financial metrics such as dividend yields, P/E ratios, and dividend payout ratios) by clicking the link below:

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Casinos are not without a fair amount of risk. Casinos are highly vulnerable to recessions, as consumers typically cut back heavily on gaming when the economy enters a downturn. The four major casino stocks saw their earnings collapse during the Great Recession. A similar impact has taken place to start 2020 due to the coronavirus crisis, which has battered the casino industry.

We have analyzed the major casino stocks in the Sure Analysis Research Database, which ranks stocks based upon the combination of their dividend yield, earnings-per-share growth potential and valuation to compute expected total returns. In this article, we will compare the expected 5-year total annual returns of the four major casino stocks.

For this article, stocks are ranked in order of least attractive to most attractive. While 5-year expected returns are incorporated in the rankings, we have also utilized a qualitative screen based on balance sheet strength and overall business quality.

You can instantly jump to a particular section of the article using the links below:

Casino Industry Overview

The casino industry is in severe distress right now. The spreading coronavirus and resulting global recession have taken their toll on the casino stocks. The large U.S. casinos are heavily reliant on Macau, the largest gaming market in the world and the only market in China where casinos are legal. As a result, these stocks are very sensitive to any developments that affect the gaming activity in Macau.

This was a significant concern several years ago. In 2014, China initiated an anti-corruption regulatory crackdown, which greatly reduced the gaming activity in the area. Fortunately for the casinos, the downturn lasted for approximately two years and gaming activity in Macau recovered thereafter. Then the gaming activity in Macau faced another headwind, namely the trade war between the U.S. and China.

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This headwind lasted for only about a year but now Macau is facing its strongest challenge ever, the outbreak of coronavirus, which has caused a huge hit in the gaming business. Casinos were shut down for an extended period due to the coronavirus. Visa restrictions have also added to the decline in gaming activity in Macau.

As a result, gross gaming revenue in Macau plunged 94.5% in August, compared with the same month last year. Gross gaming revenue in Macau declined 81.6% through the first eight months of 2020. The high sensitivity of casino stocks to all the developments related to China and their pronounced cyclicality means that investors should pick casino stocks carefully.

Top Casino Stock #4: Wynn Resorts (WYNN)

Wynn Resorts owns and operates Wynn Macau and the Wynn Palace in Macau, as well as Wynn Las Vegas and Encore in Las Vegas. Since Wynn Resorts is highly leveraged to the gaming activity in Macau, it saw its earnings collapse and it cut its dividend by 62% in 2015-2016 due to the Macau downturn that was caused by the anti-corruption regulatory crackdown in the area. But as Macau strongly recovered in the last three years, Wynn Resorts returned to growth.

Unfortunately, the company is now facing the headwind of coronavirus in all the regions in which it operates. Wynn Resorts reported earnings results for the second quarter on 8/4/2020. Revenue declined 95% year-over-year to $85.7 million, which was $190 million less than expected. The company lost $6.14 per share in the quarter, missing estimates by $1.23. Adjusted property EBITDA was a loss of $322.9 million compared to estimates of a loss of $314 million. This compared unfavorably to adjusted EBITDA of $480.6 million in the second quarter of 2019.

Results for Wynn Resorts were once again severely impacted by the COVID-19 pandemic as properties in Macau were closed for 15 days. Las Vegas operations didn’t open until June 4th.Wynn Palace revenues declined 98.6% as a result. Revenues for Wynn Macau decreased 97.8% while Las Vegas decreased 86% year-over-year. Wynn Resorts suspended its dividend in an effort to conserve capital. Consensus estimates call for a loss of $11.52 per share for 2020.

On the bright side, casinos are gradually reopening, and Wynn Resorts seems to have ample room to grow in the upcoming years thanks to its promising growth pipeline.

Source: Investor Presentation

The company has made progress in the design of Crystal Pavilion in Macau, which will be a major tourist attraction. In addition, Encore Boston Harbor opened in June-2019 and has exhibited strong performance so far so it has promising growth prospects ahead thanks to expected ramp-up in activity.

Moreover, the company has been caught off guard, with total current and long-term debt outstanding of $12.78 billion and cash and cash equivalents of $3.80 billion. Therefore, the stock is carrying an increased amount of risk right now due to its high level of debt.

However, we believe that the coronavirus crisis will not last beyond this year and we view the long-term growth prospects of the company as intact. We expect 4% annual EPS growth through 2025. Using the company’s current assets, return on assets of 5.6% over the last decade and share count, we believe Wynn Resorts has earnings power of $1.89. We will use this figure to calculate fair value and projected return.

Based off of the earnings power estimate for 2020, the stock is currently trading at a P/E ratio of 44, which is higher than its historical average of 30.1. However, the stock traded at abnormally high P/E ratios in some years due to depressed earnings in those years.

For instance, the abnormally rich valuation of the stock during 2015-2017 resulted from the market’s view that the downturn in Macau was temporary. Our target P/E ratio of 18 reflects uncertainty regarding Macau and the coronavirus. If shares reverted to our target P/E by 2025, then valuation would be a 16% headwind to annual returns over this time period.

If the stock reaches our fair valuation level over the next five years, it would reduce shareholder returns by 16%, effectively wiping out earnings growth and dividends over that time period. The stock is markedly volatile due to its high debt load, which is an added risk factor.

As a result, only those who can stomach extreme stock price volatility and have confidence in the ability of Wynn Resorts to navigate through the current crisis should consider buying the stock.

Top Casino Stock #3: MGM Resorts (MGM)

MGM Resorts owns and operates casinos, hotels and conference halls in the U.S. and China. The company has the least exposure to Macau in this group of stocks. As a result, it suffered much less than its peers from the trade war between the U.S. and China and the protests of people in Macau a few months ago.

However, the company is highly exposed to the outbreak of coronavirus, just like its peers. Due to the rapid spread of the coronavirus, MGM Resorts suspended all its casino operations in Las Vegas on March 16th and did not accept hotel reservations for the dates prior to May 1st. The company also closed its casino in Maryland.

In late July, MGM Resorts reported (7/30/20) financial results for the second quarter of fiscal 2020. The company began reopening its U.S.properties in the quarter but its revenue plunged -91% over last year’s quarter due to the suspension of the operations of the company in the U.S. and a collapse in gaming revenues in Macau caused by travel restrictions and social distancing.

Source: Investor Presentation

As a result, MGM Resorts switched from a profit of $0.23 per share in last year’s quarter to an adjusted loss of -$1.52 per share.

Due to the unprecedented downturn that has resulted from the pandemic, MGM Resorts cut its dividend by 98% in April. Moreover, in May, it issued $750 million of 5-year bonds at 6.750%. The high interest rate reflects the desperation of the company for funds and the high debt load of the company. Net debt is $20.0 billion, which is nearly twice the current market cap of the stock.

On the positive side, on August 20th, 2020, IAC (IAC) reported a 12% stake in MGM Resorts for approximately $1 billion. IAC has a portfolio of brands and digital expertise, which is expected to help MGM Resorts leverage its digital assets. IAC will join the Board of Directors of MGM Resorts. The stock jumped 12% on the announcement.

Nevertheless, due to the headwind of coronavirus, along with a huge debt load, shareholders should not expect a material boost in dividends and share repurchases for the foreseeable future. That said, the company has a positive long-term outlook for conventions and sports betting in the domestic market, as well as the ramp-up of the recently-built MGM Cotai resort, MGM Springfield, and Park MGM.

As soon as the coronavirus crisis comes to an end, MGM Resorts will benefit from these growth drivers. The company will also enhance its earnings growth via its initiative “MGM 2020”, which aims to expand margins by reducing operating costs and enhancing the efficiency of the company.

Due to the headwind from coronavirus, we expect MGM Resorts to report a net loss in 2020. Earnings-per-share are expected to gradually turn positive, with expected annual growth of 5% through 2025. After the massive dividend reduction, returns from dividends will be negligible until the full dividend is restored. Finally, a contracting valuation multiple could be an additional headwind for shareholders. Overall, we expect negative total returns in the mid-single-digits over the next five years.

Top Casino Stock #2: Melco Resorts (MLCO)

Melco Resorts owns and operates casino gaming and entertainment casino resort facilities in Asia. As Melco Resorts is the most leveraged to the gaming activity in Macau in this group of stocks, it is the most vulnerable company to the downturn in the area due to the outbreak of coronavirus.

Melco Resorts will greatly benefit as the US slowly returns to a more ‘normal’ level of activity as COVID-19 fears and cases hopefully decline. A COVID-19 vaccine would likely be a major boost for the company.

In 2019, Melco Resorts grew its revenue 11% and its earnings per share 15%, primarily thanks to its strong performance in the mass market table gaming activity. But conditions have predictably reversed, with second-quarter revenue declining 88% and adjusted property EBITDA declining to a loss of $156.3 million.

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Source: Investor Presentation

As soon as the effect of coronavirus begins to fade, the company has promising growth prospects ahead. It will benefit from the ramp-up of activity in its Morpheus Resort, which opened in mid-2018, and attract an increasing number of visitors in Cotai thanks to improvements in mass transportation.

Melco Resorts is also expanding its City of Dreams in Macau and is taking steps to open an integrated resort in Yokohama, Japan. All these initiatives are likely to be significant growth drivers as soon as Macau returns to normal.

On the other hand, due to its extreme leverage to gaming activity in Macau, the stock is highly vulnerable to any negative development related to coronavirus. Therefore, despite the promising growth prospects, we hold modest expectations for Melco, due to its extreme leverage to the activity in Macau.

It is worth noting that the gaming activity in the area was facing another headwind, protests from civilians, before the outbreak of coronavirus. Overall, we expect 2% average annual growth in earnings per share over the next five years.

The company is expected to post a significant loss for 2020. Earnings-per-share are expected to recover to $0.11 in 2021 and $1.08 in 2022. In a normalized economic backdrop, this would mean the stock trades for a P/E ratio of approximately 18, based on 2022 earnings. We view the stock as fairly valued.

Therefore, shareholder returns will be fueled by earnings-per-share growth. The stock had a 4%+ yield recently, but the company has suspended its dividend for the foreseeable future in an effort to preserve cash. Therefore, total returns are expected at just ~2% per year until the dividend is restored.

Given its healthy balance sheet, the company is likely to resume paying dividends once the coronavirus crisis ends. On the other hand, income-oriented investors should remain cautious, as the company is highly vulnerable to economic downturns and is very sensitive to any casino-related policy change in China and the ongoing coronavirus crisis.

Top Casino Stock #1: Las Vegas Sands (LVS)

Las Vegas Sands is a leading developer and operator of integrated resorts in the U.S. and Asia. Due to the outbreak of coronavirus, Las Vegas Sands is facing strong headwinds in Macau and in the U.S. As mentioned above, gaming activity has collapsed in Macau. In addition, due to the propagation of the virus in the U.S., all the casinos in Las Vegas were closed for a considerable period. As a result, Las Vegas Sands will incur a significant hit to its earnings this year.

On the other hand, beyond this year, Las Vegas Sands has promising growth prospects ahead. As Japan legalized casino gambling three years ago, Las Vegas Sands has announced that it intends to open integrated resorts in Tokyo and Yokohama. The company is the favorite bidder in this contest, which is expected to be a significant growth driver, though it will take a few years until the company earns a license and builds its new properties in Japan.

Not only do we see potential for strong earnings growth along with a high dividend yield for this stock, Las Vegas Sands also earns the top ranking because of its strong balance sheet and healthy liquidity.

Source: Investor Presentation

Furthermore, Las Vegan Sands continues to pursue growth by expanding and upgrading its Macau properties. The company launched Four Seasons Tower Suites Macao last year and it expects to perform its grand opening this year while it also expects to launch the Londoner Macao within 2020-2021 and expand Marina Bay Sands in Singapore.

In addition, Las Vegas Sands will benefit from the debut of the light rail system connecting Macau to the entire China rail network. This project will significantly increase the traffic to the casinos in Macau. Thanks to all these growth drivers and given the suppressed earnings expected this year, we expect the company to grow its earnings per share by about 4% per year over the next five years.

Las Vegas Sands stock previously offered a hefty dividend of $3.08 per share annualized, but the company suspended its dividend in 2020 amid the coronavirus pandemic. If the company were to reinstate its dividend at the same level, shares would yield nearly 6% at the current stock price.

The company is expected to see earnings dry up in 2020; our estimate of its full earnings power in a normal economy is annual earnings-per-share of $3.20. Based on this, the stock has a price-to-earnings ratio of 16.6, which is lower than our fair value estimate of around 17.0. Therefore, we see Las Vegas Sands stock as the only undervalued casino stock.

We also believe Las Vegas Sands has the strongest balance sheet. This means it is likely that the company will easily navigate through the ongoing coronavirus crisis and will enjoy a strong recovery whenever the headwind disappears from the horizon.

Final Thoughts

Gaming activity in Macau enjoyed a strong recovery from 2017-2019. But the coronavirus pandemic brought the recovery to a halt. Macau is now facing another severe downturn, due to the outbreak. The same is true for the U.S. as well, as the coronavirus crisis has resulted in weak demand. As a result, all the above casino stocks are going through a fierce downturn right now.

Melco Resorts seems the least attractive choice whereas Las Vegas Sands has by far the most attractive risk/reward profile. Wynn Resorts and MGM Resorts offer a lower expected return than Las Vegas Sands. Additionally, we prefer Las Vegan Sands for its stronger balance sheet, which is paramount during severe downturns.

While we expect the coronavirus crisis to end later this year, no one is absolutely sure when this crisis will end. To provide a perspective for the severity of the downturn, all the U.S. casino companies asked Congress for emergency financial help, as several industries have been impacted by coronavirus. Certain gaming regions like Las Vegas are preparing to reopen, which would be a major positive step for the casinos.