How do you account for the dramatic, rapid rise of casino company stocks since March, even as attendance and revenue at many venues are downversus comparable periods last year, and even though balance-sheet remediationis still a work in progress?

Could it be optimism about a sharp economic recovery in the U.S. that would include a dramatic snap-back of discretionary spending and consumer confidence?

Might it relate to a hoped-for best-case scenario in Macau, anticipating an exploding market once the Chinese governmentmakes infrastructure improvements and eases restrictions on travel?

Perhaps it's following the lead of traders, who bet that the risk of bankruptcy during the deepest debt despair for Las Vegas Sands (NYSE: LVS) and MGM Mirage (NYSE: MGM) was outweighed by the buying opportunity when both fell below $2 early in the year?

Or, is it just irrational exuberance?

Go figure
For the average investor, the foundation for such extreme optimism is hard to measure in an industry where a junk bond ratingis the rulerather than the exception.

A standard metric like the price-to-earnings ratiooffers little help. Of the nine largest publicly traded casino operators, eight have no trailing-12-month P/E because they had no "E" during that period. Isle of Capri Casinos (Nasdaq: ISLE), with the smallest market cap of this group, is the exception.

Seeking wisdom from sell-side analysts probably won't embolden average investors either. Major players with spectacular short-term stock gains -- MGM Mirage and Wynn Resorts (Nasdaq: WYNN) -- are among the least liked by Wall Street. Both have a bell-shaped curve for ratings -- a handful of buys and sells plus a majority of holds, according to Thomson Reuters data.

Still, since early March, Wynn is upnearly fivefold and MGM Mirage is up about sevenfold.

Wall Street's reluctance to forecast a comeback extends to some smaller operators, most notably Boyd Gaming , whose stock has tripled since early March. For those keeping score, analysts give Boyd one buy, 10 holds, and four sells.

Contrarian views
Equity analysts aren't squeamish about all casino companies. Their buys equal or exceed their holds-plus-sells for Penn National Gaming (Nasdaq: PENN), Ameristar Casinos (Nasdaq: ASCA), and Pinnacle Entertainment .

As luck would have it, shares for these neither Vegas nor Macau companies have trailed MGM Mirage and Wynn Resorts over the past six months.

This group also lags the returns from Las Vegas Sands, which picked up more Wall Street supporters in recent weeks as the stock now trades 14 times higher than in early March. Analysts now have eight buys, seven holds, and two sells.

External trends
Once you get past the dramatic stock increases, investors who didn't get on the bandwagon -- and even those who did -- should check the nitty-gritty of balance sheets as well as trends for discretionary spending and tourism. Continued...