Choice Hotels International (NYSE:CHH) and Melco Resorts & Entertainment (NASDAQ:MLCO) are both consumer discretionary companies, but which is the better investment? We will compare the two companies based on the strength of their risk, institutional ownership, analyst recommendations, earnings, profitability, valuation and dividends.

Analyst Ratings

This is a breakdown of current ratings and target prices for Choice Hotels International and Melco Resorts & Entertainment, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Choice Hotels International 2 6 1 0 1.89
Melco Resorts & Entertainment 0 1 9 0 2.90

Choice Hotels International currently has a consensus target price of $82.88, indicating a potential upside of 10.26%. Melco Resorts & Entertainment has a consensus target price of $32.02, indicating a potential upside of 69.94%. Given Melco Resorts & Entertainment’s stronger consensus rating and higher probable upside, analysts clearly believe Melco Resorts & Entertainment is more favorable than Choice Hotels International.

Institutional and Insider Ownership

54.7% of Choice Hotels International shares are held by institutional investors. Comparatively, 40.5% of Melco Resorts & Entertainment shares are held by institutional investors. 24.4% of Choice Hotels International shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Risk & Volatility

Choice Hotels International has a beta of 1.01, indicating that its share price is 1% more volatile than the S&P 500. Comparatively, Melco Resorts & Entertainment has a beta of 1.48, indicating that its share price is 48% more volatile than the S&P 500.

Valuation & Earnings

This table compares Choice Hotels International and Melco Resorts & Entertainment’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Choice Hotels International $1.01 billion 4.23 $114.89 million $2.88 26.10
Melco Resorts & Entertainment $5.28 billion 1.76 $347.00 million $0.92 20.48

Melco Resorts & Entertainment has higher revenue and earnings than Choice Hotels International. Melco Resorts & Entertainment is trading at a lower price-to-earnings ratio than Choice Hotels International, indicating that it is currently the more affordable of the two stocks.

Dividends

Choice Hotels International pays an annual dividend of $0.86 per share and has a dividend yield of 1.1%. Melco Resorts & Entertainment pays an annual dividend of $0.57 per share and has a dividend yield of 3.0%. Choice Hotels International pays out 29.9% of its earnings in the form of a dividend. Melco Resorts & Entertainment pays out 62.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Choice Hotels International has increased its dividend for 4 consecutive years.

Profitability

This table compares Choice Hotels International and Melco Resorts & Entertainment’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Choice Hotels International 14.08% -87.57% 18.88%
Melco Resorts & Entertainment 7.83% 15.47% 5.86%

Summary

Choice Hotels International beats Melco Resorts & Entertainment on 9 of the 17 factors compared between the two stocks.

Choice Hotels International Company Profile

Choice Hotels International, Inc., together with its subsidiaries, operates as a hotel franchisor worldwide. It operates through Hotel Franchising and SkyTouch Technology segments. The company franchises lodging properties under the brand names of Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn, MainStay Suites, Suburban Extended Stay Hotel, Cambria hotels & suites, and Ascend Hotel Collection. It also develops and markets cloud-based technology products to the hotel industry, including inventory management, pricing, and connectivity to third party channels and hoteliers; and provides onsite and remote installation, training, and phone support services. As of August 7, 2018, the company franchised approximately 6,800 hotels with 550,000 rooms. Choice Hotels International, Inc. was founded in 1939 and is based in Rockville, Maryland.

Melco Resorts & Entertainment Company Profile

Melco Resorts & Entertainment Limited, through its subsidiaries, develops, owns, and operates casino gaming and entertainment casino resort facilities in Asia. It owns and operates City of Dreams, an integrated casino resort that has 500 gaming tables and 800 gaming machines; approximately 1,400 hotel rooms and suites; a wet stage performance theater with approximately 2,000 seats; approximately 30 restaurants and bars, and 150 retail outlets; and recreation and leisure facilities, including health and fitness clubs, swimming pools, spa and salons, and banquet and meeting facilities. The company also operates Altira Macau, a casino hotel, which has approximately 112 gaming tables and 56 gaming machines; 230 hotel rooms; various fine dining and casual restaurants, and recreation and leisure facilities; and various non-gaming amenities comprising spa, gymnasium, outdoor garden podium, and sky terrace lounge. In addition, it operates Studio City, a cinematically-themed integrated entertainment, retail, and gaming resort that comprises 280 gaming tables and 980 gaming machines in Cotai, Macau. Further, the company owns and operates 7 Mocha Clubs with 1,034 gaming machines, as well as Taipa Square casino in Taipa Island, Macau. Additionally, it operates and manages City of Dreams Manila, a casino, hotel, retail, and entertainment integrated resort in the Entertainment City complex in Manila. The company was formerly known as Melco Crown Entertainment Limited and changed its name to Melco Resorts & Entertainment Limited in April 2017. Melco Resorts & Entertainment Limited was incorporated in 2004 and is based in Central, Hong Kong. As of February 16, 2017, Melco Resorts & Entertainment Limited operates as a subsidiary of Melco Leisure and Entertainment Group Limited.

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