Analyzing Diamondrock Hospitality (DRH) & MGM Growth Properties (MGP)

Diamondrock Hospitality (NYSE: DRH) and MGM Growth Properties (NYSE:MGP) are both finance companies, but which is the better stock? We will compare the two businesses based on the strength of their institutional ownership, earnings, risk, profitability, dividends, analyst recommendations and valuation.

Dividends

Diamondrock Hospitality pays an annual dividend of $0.50 per share and has a dividend yield of 4.6%. MGM Growth Properties pays an annual dividend of $1.58 per share and has a dividend yield of 5.1%. Diamondrock Hospitality pays out 102.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. MGM Growth Properties pays out 205.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares Diamondrock Hospitality and MGM Growth Properties’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Diamondrock Hospitality 11.47% 5.41% 3.23%
MGM Growth Properties 6.21% 0.81% 0.48%

Analyst Recommendations

This is a summary of current ratings and recommmendations for Diamondrock Hospitality and MGM Growth Properties, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Diamondrock Hospitality 3 4 6 0 2.23
MGM Growth Properties 0 1 4 0 2.80

Diamondrock Hospitality currently has a consensus target price of $11.48, suggesting a potential upside of 4.93%. MGM Growth Properties has a consensus target price of $31.20, suggesting a potential upside of 0.35%. Given Diamondrock Hospitality’s higher possible upside, equities research analysts clearly believe Diamondrock Hospitality is more favorable than MGM Growth Properties.

Earnings and Valuation

This table compares Diamondrock Hospitality and MGM Growth Properties’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Diamondrock Hospitality $866.34 million 2.53 $242.01 million $0.49 22.33
MGM Growth Properties $725.00 million 2.47 $613.53 million $0.77 40.38

MGM Growth Properties has higher revenue, but lower earnings than Diamondrock Hospitality. Diamondrock Hospitality is trading at a lower price-to-earnings ratio than MGM Growth Properties, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Diamondrock Hospitality has a beta of 1.39, suggesting that its stock price is 39% more volatile than the S&P 500. Comparatively, MGM Growth Properties has a beta of -1.31, suggesting that its stock price is 231% less volatile than the S&P 500.

Summary

Diamondrock Hospitality beats MGM Growth Properties on 9 of the 14 factors compared between the two stocks.

About Diamondrock Hospitality

DiamondRock Hospitality Company is a real estate investment trust (REIT). As of December 31, 2016, the Company owned a portfolio of 26 hotels and resorts that contains 9,472 guest rooms located in 17 different markets in North America and the United States Virgin Islands. Its business is to acquire, own, asset manage and renovate hotel properties in the United States. Its portfolio is concentrated in gateway cities and destination resort locations. It conducts its business through an umbrella partnership REIT (UPREIT) in, which its hotels are owned by subsidiaries of its operating partnership, DiamondRock Hospitality Limited Partnership. The Company is the general partner of its operating partnership and owns, either directly or indirectly, all of the limited partnership units of its operating partnership. The Company leases all of its domestic hotels to taxable REIT subsidiary, Bloodstone TRS, Inc. (TRS) lessees.

About MGM Growth Properties

MGM Growth Properties LLC is a real estate investment trust engaged in the acquisition, ownership and leasing of destination entertainment and leisure resorts, whose amenities include casino gaming, hotel, convention, dining, entertainment and retail offerings. Its portfolio consists of approximately 10 destination resorts. It has over six entertainment and gaming-related properties located on the Las Vegas Strip, including Mandalay Bay, The Mirage, Monte Carlo, New York-New York, Luxor and Excalibur, and The Park, a dining and entertainment complex located between New York-New York and Monte Carlo. Outside of Las Vegas, it owns over four casino resort properties, including MGM Grand Detroit in Detroit, Michigan, Borgata Hotel Casino & Spa in Atlantic City, New Jersey, and Beau Rivage and Gold Strike Tunica, both of which are located in Mississippi. It operates approximately 27,330 hotel rooms, over 200 restaurants, approximately 100 retail outlets and over 20 entertainment venues.

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