Better Buy: Wynn Resorts Ltd. vs. Vail Resorts
For Wynn Resorts (NASDAQ: WYNN), fun means casino gaming, live entertainment, shopping, fine dining, and outdoor activities like golf and swimming. Meanwhile, Vail Resorts (NYSE: MTN) has a much different idea of the resort lifestyle, focusing largely on winter sports like skiing and snowboarding. Despite their different approaches to recreation, both Vail Resorts and Wynn Resorts have given their shareholders impressive results lately, and some investors would like to know which of the two stocks they should consider adding to their portfolios right now. Let's look at how Wynn Resorts and Vail Resorts compare on some key metrics to see which deserves your attention.
Valuation and stock performance
Both Wynn Resorts and Vail Resorts have performed well over the past 12 months. Wynn has posted a total return of about 17% since February 2017, bouncing back from a weak period. But Vail Resorts has soared far higher, with a 47% gain over the same period.
Image source: Vail Resorts.
Typically, when one stock sees a big move higher, its valuation skyrockets in comparison to the weaker-performing stock. That's definitely the case here. When you look at earnings over the past 12 months, Vail Resorts trades at a high valuation of 47 times earnings. Wynn, however, isn't that much cheaper, with a trailing earnings multiple of 40.
However, incorporating future earnings estimates makes the valuation disparity more apparent. Wynn's stock price is just 19 times its forward earnings projections. Vail Resorts carries a forward earnings multiple of almost 32. Based solely on these simple valuation metrics, Wynn Resorts has an edge over its ski-resort industry peer.
Dividends
For dividend investors, both Wynn and Vail offer modest but reasonable dividends. Based on current yield, Wynn has an edge, with its 2.1% dividend yield edging out the 1.8% yield that Vail's stock offers investors.
Yet there's a lot more to the dividend story with these two stocks than initially meets the eye. Wynn made several large special dividend payouts, only turning to regular quarterly dividends within the past seven years. Faced with a crisis in the Asian gaming capital of Macau, Wynn slashed its quarterly dividend by two-thirds about two years ago, choosing to weather the storm without putting its balance sheet at risk. That decision was a tough one, but it has had the desired result, and Wynn has seen its stock nearly double from its worst levels.
Vail, on the other hand, has seen its dividend move nearly straight up recently. In just the past two years, Vail has almost doubled its quarterly dividend payout, and the amount has climbed fivefold since the ski resort specialist paid its first dividend in mid-2011. At this point, the two stocks look roughly similar in terms of their dividends, but the future could bring big changes to both companies. Investors should watch Vail especially closely, because it has traditionally chosen March as the time to make its dividend-increase announcements each year.
Growth prospects and risk
Sentiment about Wynn Resorts and Vail Resorts has been quite different lately, even though both stocks have climbed. For Wynn Resorts, everything has focused on how quickly it can see the Macau market recover, especially in light of its new Wynn Palace resort on the Cotai Strip there. In its most recent quarter, Wynn reported solid revenue gains because of the opening of the Wynn Palace, but sales at its legacy properties were mostly lower. Also, adjusted net income was down by more than half over the past 12 months. The casino giant is optimistic that it can ride the wave of popularity of its new Macau resort to generate good results going forward, but the overall turnaround in Macau has been a bit slower than most investors had hoped. Most of those following the industry no longer think that the Asian gaming capital will see another sustained downturn, but a quick bounce also appears not to be in the cards at this point, and that could weigh on Wynn going forward.
By contrast, Vail Resorts has seen huge growth. The ski specialist's most recent report doesn't really show the success the company has had, because the fiscal first quarter typically includes only a tiny portion of the early winter and therefore doesn't reflect Vail's high season. Nevertheless, Vail said that its acquisition of premier British Columbia resort Whistler Blackcomb could lead to a brand-new feeling during the 2016-17 ski season, and early sales of season passes were up 16% in number terms and 20% in dollar terms. Even some off-season numbers looked favorable, and the resort operator believse that net income could climb anywhere from 10% to 30% this year depending on how things go during the winter. All in all, Vail's growth prospects look clearer than Wynn's, given the current environments they face.
Overall, Vail Resorts has an edge as a better buy over Wynn. Despite its higher valuation, Vail has delivered faster dividend growth and appears to be in full expansion mode, with plenty of upward momentum looking ahead. Wynn isn't a bad pick, but its prospects appear more in doubt and are more reliant on external factors over which it doesn't have complete control.
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Dan Caplinger owns shares of Wynn Resorts. The Motley Fool recommends Vail Resorts. The Motley Fool has a disclosure policy.