MGM Resorts International (MGM), Melco Crown Entertainment Ltd (ADR) (MPEL), Las Vegas Sands Corp. (LVS): Is This Company a Cash King?

While Las Vegas Sands Corp. (NYSE:LVS) has a strong foothold in its home territory, it has managed to show impressive growth in Macau. However, the company has faced heavy competition from Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) and Wynn. Further, all of these companies have struggled to keep up with past growth trends due to the struggling Asian economy. Las Vegas Sands Corp. (NYSE:LVS)’ choice not to expand into online gaming may also cause it to face domestic challenges if online gaming becomes legal. While these companies have faced struggles in Macau, however, their international exposure has helped shield them from the dramatic reductions in Vegas gambling in recent years. MGM Resorts International (NYSE:MGM), however, has not been so lucky.

The cash king margin can help you find highly profitable businesses, but it should only be the start of your search. The ratio does have its limits, especially for fast-growing small businesses. Many such companies reinvest all of their cash flow into growing the business, leaving them little or no free cash — but that doesn’t necessarily make them poor investments. Conversely, the formula works better for slower-growing blue chips. You’ll need to look closer to determine exactly how a company is using its cash.

Still, if you can cut through the earnings headlines to follow the cash instead, you might be on the path toward seriously great investments.

The article Is Las Vegas Sands a Cash King? originally appeared on Fool.com.

Jim Royal has no position in any stocks mentioned, and neither does The Motley Fool.

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