Critical Review: MGM China (OTCMKTS:MCHVF) & Churchill Downs (NASDAQ:CHDN)

Churchill Downs (NASDAQ:CHDN) and MGM China (OTCMKTS:MCHVF) are both consumer discretionary companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, institutional ownership, dividends, earnings, profitability, analyst recommendations and risk.

Profitability

This table compares Churchill Downs and MGM China’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Churchill Downs	13.82%	42.16%	6.31%
MGM China	N/A	N/A	N/A

Earnings & Valuation

This table compares Churchill Downs and MGM China”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Churchill Downs	$2.93 billion	2.06	$383.00 million	$5.83	14.82
MGM China	N/A	N/A	N/A	$1.55	0.90

Churchill Downs has higher revenue and earnings than MGM China. MGM China is trading at a lower price-to-earnings ratio than Churchill Downs, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

82.6% of Churchill Downs shares are owned by institutional investors. Comparatively, 9.1% of MGM China shares are owned by institutional investors. 5.9% of Churchill Downs shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Churchill Downs and MGM China, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Churchill Downs	1	0	9	0	2.80
MGM China	0	0	0	0	0.00

Churchill Downs presently has a consensus target price of $136.88, indicating a potential upside of 58.40%. Given Churchill Downs’ stronger consensus rating and higher possible upside, research analysts plainly believe Churchill Downs is more favorable than MGM China.

Dividends

Churchill Downs pays an annual dividend of $0.44 per share and has a dividend yield of 0.5%. MGM China pays an annual dividend of $0.49 per share and has a dividend yield of 35.0%. Churchill Downs pays out 7.5% of its earnings in the form of a dividend. MGM China pays out 31.6% 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. Churchill Downs has raised its dividend for 14 consecutive years.

Summary

Churchill Downs beats MGM China on 13 of the 14 factors compared between the two stocks.

About Churchill Downs

Churchill Downs Incorporated operates as a racing, online wagering, and gaming entertainment company in the United States. It operates through three segments: Live and Historical Racing, TwinSpires, and Gaming. The company operates pari-mutuel gaming entertainment venues; TwinSpires, an online wagering platform for horse racing, sports, and iGaming; retail sports books; casino gaming; and Terre Haute Casino Resort. It also offers streaming video of live horse races, replays, and an assortment of racing and handicapping information; and provides the Bloodstock Research Information Services platform for horse racing statistical data. In addition, the company manufactures and operates pari-mutuel wagering systems for racetracks, off-track betting facilities, and other pari-mutuel wagering businesses. Churchill Downs Incorporated was founded in 1875 and is headquartered in Louisville, Kentucky.

About MGM China

MGM China Holdings Limited, an investment holding company, engages in the development, ownership, and operation of gaming and lodging resorts in the Greater China region. The company develops and operates casino games of chance and other casino games, and related hotel and resort facilities, as well as provides hotel management services; and develops integrated resorts in Macau. It owns and operates MGM Macau, an integrated resort that includes a casino with slot machines, gaming tables, multiple VIP, and private gaming areas; a hotel with rooms, suites, and villas; and amenities, including restaurants, retail outlets, pool, and spa facilities, as well as a convention space. The company also owns MGM Cotai, a resort that consists of a casino with slot machines and gaming tables; hotel with rooms, suites, and skylofts; restaurants and bars; retail outlets; and meeting space, as well as other non-gaming offerings. In addition, it is involved in the provision of outsourcing services, including information technology, accounting, human resources, hotel reservation, and convention consultation. The company was incorporated in 2010 and is headquartered in Macau. MGM China Holdings Limited operates as a subsidiary of MGM Resorts International Holdings, Ltd.