Analyzing InterContinental Hotels Group (IHG) & Choice Hotels (CHH)

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

Dividends

InterContinental Hotels Group pays an annual dividend of $1.02 per share and has a dividend yield of 1.6%. Choice Hotels pays an annual dividend of $0.86 per share and has a dividend yield of 1.1%. InterContinental Hotels Group pays out 42.0% of its earnings in the form of a dividend. Choice Hotels pays out 29.9% 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. InterContinental Hotels Group has increased its dividend for 5 consecutive years and Choice Hotels has increased its dividend for 4 consecutive years. InterContinental Hotels Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.



Analyst Recommendations

This is a breakdown of current recommendations for InterContinental Hotels Group and Choice Hotels, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
InterContinental Hotels Group 0 3 2 0 2.40
Choice Hotels 2 5 0 0 1.71

InterContinental Hotels Group presently has a consensus price target of $64.19, suggesting a potential downside of 1.59%. Choice Hotels has a consensus price target of $80.50, suggesting a potential upside of 0.69%. Given Choice Hotels’ higher probable upside, analysts plainly believe Choice Hotels is more favorable than InterContinental Hotels Group.

Volatility & Risk

InterContinental Hotels Group has a beta of 1.31, indicating that its share price is 31% more volatile than the S&P 500. Comparatively, Choice Hotels has a beta of 1.1, indicating that its share price is 10% more volatile than the S&P 500.

Institutional & Insider Ownership

6.7% of InterContinental Hotels Group shares are held by institutional investors. Comparatively, 51.4% of Choice Hotels shares are held by institutional investors. 22.0% of Choice Hotels shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares InterContinental Hotels Group and Choice Hotels’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
InterContinental Hotels Group N/A N/A N/A
Choice Hotels 10.92% -74.98% 17.84%

Valuation and Earnings

This table compares InterContinental Hotels Group and Choice Hotels’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
InterContinental Hotels Group $1.78 billion 6.97 $592.00 million $2.43 26.84
Choice Hotels $1.01 billion 4.50 $114.89 million $2.88 27.76

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

Summary

InterContinental Hotels Group beats Choice Hotels on 9 of the 17 factors compared between the two stocks.

InterContinental Hotels Group Company Profile

InterContinental Hotels Group PLC owns, manages, franchises, and leases hotels in the Americas, Europe, Asia, the Middle East, Africa, and Greater China. The company operates hotels, resorts, and restaurants under the InterContinental, Kimpton, Hotel Indigo, EVEN, HUALUXE, Crowne Plaza, Holiday Inn, Holiday Inn Express, Holiday Inn Club Vacations, Holiday Inn Resort, avid, Staybridge Suites, and Candlewood Suites brands. It also provides IHG Rewards Club, a hotel loyalty program. As of December 31, 2017, the company had 5,348 hotels with 798,075 rooms. InterContinental Hotels Group PLC was founded in 1967 and is headquartered in Denham, the United Kingdom.

Choice Hotels 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 March 28, 2018, the company franchised approximately 6,800 hotels with 500,000 rooms. Choice Hotels International, Inc. was founded in 1939 and is based in Rockville, Maryland.

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