Portillo’s (NASDAQ:PTLO) and Choice Hotels International (NYSE:CHH) Critical Analysis

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

Profitability

This table compares Choice Hotels International and Portillo’s’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Choice Hotels International	20.28%	205.69%	10.68%
Portillo’s	1.85%	2.78%	0.86%

Analyst Ratings

This is a summary of current recommendations and price targets for Choice Hotels International and Portillo’s, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Choice Hotels International	3	9	3	0	2.00
Portillo’s	1	8	2	0	2.09

Choice Hotels International currently has a consensus target price of $113.38, indicating a potential downside of 2.09%. Portillo’s has a consensus target price of $5.66, indicating a potential upside of 7.64%. Given Portillo’s’ stronger consensus rating and higher possible upside, analysts clearly believe Portillo’s is more favorable than Choice Hotels International.

Insider and Institutional Ownership

65.6% of Choice Hotels International shares are held by institutional investors. Comparatively, 98.3% of Portillo’s shares are held by institutional investors. 23.9% of Choice Hotels International shares are held by insiders. Comparatively, 6.3% of Portillo’s shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Volatility & Risk

Choice Hotels International has a beta of 0.65, indicating that its stock price is 35% less volatile than the S&P 500. Comparatively, Portillo’s has a beta of 1.51, indicating that its stock price is 51% more volatile than the S&P 500.

Earnings and Valuation

This table compares Choice Hotels International and Portillo’s”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Choice Hotels International	$1.60 billion	3.26	$369.95 million	$7.08	16.36
Portillo’s	$732.07 million	0.55	$19.34 million	$0.18	29.19

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

Summary

Choice Hotels International beats Portillo’s on 9 of the 14 factors compared between the two stocks.

About Choice Hotels International

Choice Hotels International, Inc., together with its subsidiaries, operates as a hotel franchisor in the United States and internationally. It operates through Hotel Franchising & Management and Corporate & Other segments. The company franchises lodging properties under the brand names of Comfort Inn, Comfort Suites, Quality, Clarion, Clarion Pointe, Sleep Inn, Ascend Hotel Collection, Econo Lodge, Rodeway Inn, MainStay Suites, Suburban Studios, WoodSpring Suites, Everhome Suites, Cambria Hotels, Radisson Blu, Radisson RED, Radisson, Park Plaza, Country Inn & Suites by Radisson, Radisson Inn & Suites, Park Inn by Radisson, Radisson Individuals, and Radisson Collection. Choice Hotels International, Inc. was founded in 1939 and is headquartered in North Bethesda, Maryland.

About Portillo’s

Portillo’s Inc. owns and operates fast casual restaurants in the United States. The company offers Chicago-style hot dogs and sausages, Italian beef sandwiches, char-grilled burgers, chopped salads, crinkle-cut French fries, homemade chocolate cakes, and chocolate cake shake. It offers its products through its website, application, and certain third-party platforms. Portillo’s Inc. was founded in 1963 and is based in Oak Brook, Illinois.