Wynn Resorts, Limited (NASDAQ:WYNN) shares are up more than 84.42% this year and recently increased 0.39% or $0.62 to settle at $159.54. Vail Resorts, Inc. (NYSE:MTN), on the other hand, is up 39.79% year to date as of 12/08/2017. It currently trades at $225.49 and has returned 0.80% during the past week.
Wynn Resorts, Limited (NASDAQ:WYNN) and Vail Resorts, Inc. (NYSE:MTN) are the two most active stocks in the Resorts & Casinos industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect WYNN to grow earnings at a 8.00% annual rate over the next 5 years. Comparatively, MTN is expected to grow at a 17.50% annual rate. All else equal, MTN’s higher growth rate would imply a greater potential for capital appreciation.
Profitability and Returns
Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use EBITDA margin and Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. , compared to an EBITDA margin of 29.48% for Vail Resorts, Inc. (MTN). WYNN’s ROI is 5.00% while MTN has a ROI of 9.20%. The interpretation is that MTN’s business generates a higher return on investment than WYNN’s.
Cash is king when it comes to investing. WYNN’s free cash flow (“FCF”) per share for the trailing twelve months was +1.22. Comparatively, MTN’s free cash flow per share was +1.87. On a percent-of-sales basis, WYNN’s free cash flow was 2.81% while MTN converted 3.92% of its revenues into cash flow. This means that, for a given level of sales, MTN is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. WYNN has a current ratio of 1.70 compared to 0.70 for MTN. This means that WYNN can more easily cover its most immediate liabilities over the next twelve months. WYNN’s debt-to-equity ratio is 30.92 versus a D/E of 0.81 for MTN. WYNN is therefore the more solvent of the two companies, and has lower financial risk.
WYNN trades at a forward P/E of 24.48, a P/B of 49.55, and a P/S of 2.75, compared to a forward P/E of 31.52, a P/B of 5.75, and a P/S of 4.74 for MTN. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.
Analyst Price Targets and Opinions
A cheap stock isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. WYNN is currently priced at a 1.99% to its one-year price target of 156.43. Comparatively, MTN is -9.7% relative to its price target of 249.71. This suggests that MTN is the better investment over the next year.
The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.40 for WYNN and 1.80 for MTN, which implies that analysts are more bullish on the outlook for WYNN.
Risk and Volatility
Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. WYNN has a beta of 1.73 and MTN’s beta is 0.45. MTN’s shares are therefore the less volatile of the two stocks.
Insider Activity and Investor Sentiment
The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. WYNN has a short ratio of 2.87 compared to a short interest of 3.03 for MTN. This implies that the market is currently less bearish on the outlook for WYNN.
Vail Resorts, Inc. (NYSE:MTN) beats Wynn Resorts, Limited (NASDAQ:WYNN) on a total of 10 of the 14 factors compared between the two stocks. MTN higher liquidity, is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. MTN is more undervalued relative to its price target. Finally, DPZ has better sentiment signals based on short interest.