Healthy Growth for Wynn Resorts, but Is Their Stock a Good Investment?

Wynn Resorts have revealed their 2014 Q1 financial figures causing their share prices to skyrocket.

While casinos are certainly home to gambling activity in the most direct meaning, stock market play with the stocks of casino companies provides a healthy alternative to those in the know. Wynn Resorts is enjoying great times when their stock is considered.

After the company has revealed financial figures for the 2014 Q1, their stock increased a whopping 7 percent and closed at $221.68 on May 1st. Currently, the casino operator’s stock is trading at 82 percent over their year-low. But the investors are still choosing between Wynn, Las Vegas Sands, and Melco Crown Entertainment for their long term investments into operators working under American gambling laws.

Wynn Resort performance

Looking at the financial results, it’s safe to say Wynn Resorts have outperformed the expectations. In the first quarter of the year their earnings amounted to $1.51 billion, beating $1.48 billion projected earnings and increasing last year’s figures of $1.38 billion by 9 percent. A large portion of these earnings came from Macau, where sales grew 14 percent to $1.13 billion.

Is Wynn Resorts stock a good investment?

• The company operating under American gambling laws shows healthy growth

• Wynn stock is better suited for long-term investments

• Investors looking for fast-growing companies will like Melco and Sands

However, the have been some decline in the company’s operations as well. While Macau performed great, Las Vegas revenues fell 1.5 percent to $380.9 million year on year. But US casino revenue falls have been anticipated by the industry analysts, so investors aren’t too worried. Additionally, prospects of online casinos in the United States could potentially put investors to a much better mood.

As for the profits, Wynn has managed to perform even better. In Q1 2014 earnings of $2.22 per share have been reported, way better than the projected $2.11 figure and 11 percent up from $2.00 figure last year. The company revealed that declines in amortization, depreciation, and food and beverage expenses have offset the higher general, administrative and casino costs.

During the five years between 2009 and 2013 Wynn have managed to increase their revenue a staggering 85% to $5.6 billion. Reports reveal that most of the sales increase came from Macau business, although Las Vegas operations have also helped somewhat.

Las Vegas revenues during this period grew 29% to $1.58 billion, while Macau shows a hefty figure of 122% increase to $4.04 billion. The success is largely attributed to continuous investment in the region aiming to grab a larger market share, however, general increase in casino sales in the region has also helped.

Wynn Resorts and competition

However impressive Wynn’s growth, it can’t even compare with the rate enjoyed by their nearest rivals of Las Vegas Sands and Melco Crown. During the same 5-year period, Sands experienced a whopping 202% revenue growth to $13.77 billion, again mainly boosted by Macau sales. Last year alone Sands made $8.99 billion there.

The fastest growing casino operator with tremendous exposure in Macau is Melco Crown. The above-mentioned 5-year period resulted in 282% revenue hike to $5.09 billion. All of Melco’s revenue comes from Macau unlike Sands and Wynn. This advantage allows the company to increase their overall sales at a much higher pace.

Melco Crown, however, has realized that growth potential lies not only in Macau and has been working hard on their City of Dreams Manila gambling resort in the Philippines. It’s expected to open its doors later this year.

Wynn Resort prospects

After looking at all the data, it’s very easy to understand why Wynn shares are on the rise. Over performing the estimates in both bottom lines, as well as great long-term performance is impressive indeed. If Macau continues to grow, and there are no reasons why it shouldn’t, Wynn will continue to show strong growth as well.

However, Wynn Resorts stock is more suited for long-term investment, while those looking for fast-growing casino companies will probably focus more on Las Vegas Sands and Melco Crown.