Zynga (NASDAQ: ZNGA) and Sohu.com (NASDAQ:SOHU) are both consumer discretionary companies, but which is the better investment? We will compare the two companies based on the strength of their analyst recommendations, risk, profitabiliy, dividends, valuation, institutional ownership and earnings.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Zynga and Sohu.com, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Zynga 0 4 8 0 2.67
Sohu.com 1 3 1 0 2.00

Zynga currently has a consensus price target of $3.89, suggesting a potential upside of 3.76%. Sohu.com has a consensus price target of $50.10, suggesting a potential upside of 6.23%. Given Sohu.com’s higher probable upside, analysts clearly believe Sohu.com is more favorable than Zynga.

Risk & Volatility

Zynga has a beta of 0.84, meaning that its share price is 16% less volatile than the S&P 500. Comparatively, Sohu.com has a beta of 1.34, meaning that its share price is 34% more volatile than the S&P 500.

Institutional & Insider Ownership

65.8% of Zynga shares are held by institutional investors. Comparatively, 63.1% of Sohu.com shares are held by institutional investors. 12.4% of Zynga shares are held by company insiders. Comparatively, 21.0% of Sohu.com shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Profitability

This table compares Zynga and Sohu.com’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Zynga -12.16% -5.25% -4.45%
Sohu.com -16.83% -17.02% -10.43%

Earnings and Valuation

This table compares Zynga and Sohu.com’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Zynga $748.98 million 4.31 -$79.42 million ($0.11) -34.09
Sohu.com $1.62 billion 1.13 $34.28 million ($7.06) -6.68

Sohu.com has higher revenue and earnings than Zynga. Zynga is trading at a lower price-to-earnings ratio than Sohu.com, indicating that it is currently the more affordable of the two stocks.

Summary

Zynga beats Sohu.com on 8 of the 13 factors compared between the two stocks.

About Zynga

Zynga Inc. is a provider of social game services. The Company develops, markets and operates social games as live services played on mobile platforms, such as iPhone Operating System (iOS) operating system and Android operating system and social networking sites, such as Facebook. The Company has developed a range of social games, including games in its Slots, Words With Friends, Zynga Poker and FarmVille franchises. It operates its games as live services and updates them with new features. It analyzes the data generated by its players’ game play and social interactions to guide the creation of new content and features. The Company operates its games as live services that are available anytime and anywhere. The Company invests in game categories, including Social Casino, Casual, Action Strategy and Invest Express. Social Casino includes Zynga Poker and its Slots games, such as Hit It Rich! Slots, Wizard of Oz Slots, Willy Wonka and the Chocolate Factory Slots, and Black Diamond Casino.

About Sohu.com

Sohu.com Inc. (Sohu) is an online media, search and game service company, which is engaged in providing online products and services on personal computers (PCs) and mobile devices in the People’s Republic of China (the PRC). The Company operates through three segments: the Sohu segment; the Sogou segment, and the Changyou segment. The Sohu segment’s business is the brand advertising business, which offers to users, over its matrices of Chinese language online media, various content, products and services across multiple Internet-enabled devices, such as PCs, mobile phones and tablets. The search and search-related business primarily offers advertisers pay-for-click services, as well as online marketing services on Web directories operated by Sogou. Changyou’s business lines consist of the online game business; the platform channel business, which consists primarily of online advertising and also includes Internet value-added services (IVAS), and the cinema advertising business.

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