Contrasting Choice Hotels International (NYSE:CHH) & Yum! Brands (NYSE:YUM)

Choice Hotels International (NYSE:CHH) and Yum! Brands (NYSE:YUM) are both consumer discretionary companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, earnings, profitability, dividends, analyst recommendations, risk and institutional ownership.

Institutional & Insider Ownership

65.6% of Choice Hotels International shares are owned by institutional investors. Comparatively, 82.4% of Yum! Brands shares are owned by institutional investors. 23.9% of Choice Hotels International shares are owned by insiders. Comparatively, 0.1% of Yum! Brands shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Volatility & Risk

Choice Hotels International has a beta of 0.65, meaning that its share price is 35% less volatile than the S&P 500. Comparatively, Yum! Brands has a beta of 0.53, meaning that its share price is 47% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Choice Hotels International and Yum! Brands, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Choice Hotels International	3	10	2	0	1.93
Yum! Brands	1	12	14	0	2.48

Choice Hotels International presently has a consensus price target of $115.69, indicating a potential downside of 3.53%. Yum! Brands has a consensus price target of $175.67, indicating a potential upside of 9.79%. Given Yum! Brands’ stronger consensus rating and higher probable upside, analysts plainly believe Yum! Brands is more favorable than Choice Hotels International.

Profitability

This table compares Choice Hotels International and Yum! Brands’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Choice Hotels International	12.65%	216.71%	10.71%
Yum! Brands	39.14%	-25.54%	21.03%

Dividends

Choice Hotels International pays an annual dividend of $1.15 per share and has a dividend yield of 1.0%. Yum! Brands pays an annual dividend of $3.00 per share and has a dividend yield of 1.9%. Choice Hotels International pays out 25.6% of its earnings in the form of a dividend. Yum! Brands pays out 24.1% 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. Yum! Brands has increased its dividend for 8 consecutive years. Yum! Brands is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Choice Hotels International and Yum! Brands”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Choice Hotels International	$1.63 billion	3.28	$369.95 million	$4.50	26.65
Yum! Brands	$8.80 billion	4.88	$1.56 billion	$12.46	12.84

Yum! Brands has higher revenue and earnings than Choice Hotels International. Yum! Brands 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.

Summary

Yum! Brands beats Choice Hotels International on 13 of the 17 factors compared between the two stocks.

About Choice Hotels International

Choice Hotels International, Inc. is a hospitality company that primarily franchises hotels under a portfolio of brands serving a range of travelers, from economy and extended-stay guests to upscale customers. Its brands include Comfort, Quality Inn, Sleep Inn, Clarion, Cambria Hotels, Ascend Hotel Collection, Radisson, Everhome Suites, MainStay Suites, Suburban Studios and WoodSpring Suites. The company traces its roots to 1939, when a group of U.S. motel owners formed Quality Courts United, an organization that later became Choice Hotels.

About Yum! Brands

Yum! Brands, Inc. is a global restaurant company that operates and franchises quick-service restaurants under the KFC, Taco Bell, Pizza Hut and Habit Burger & Grill brands. Its restaurants serve customers through dine-in, takeout, delivery and digital ordering channels. The company’s brands offer a range of products, including KFC’s chicken meals, Taco Bell’s Mexican-inspired food, Pizza Hut’s pizzas and related items, and Habit Burger & Grill’s chargrilled burgers and sandwiches. Yum! Brands’ business relies heavily on franchised restaurants, alongside locations it operates directly.