Critical Comparison: Choice Hotels International (CHH) and Penn National Gaming (PENN)

Choice Hotels International (NYSE: CHH) and Penn National Gaming (NASDAQ:PENN) are both mid-cap consumer discretionary companies, but which is the superior business? We will compare the two businesses based on the strength of their risk, profitability, dividends, institutional ownership, valuation, analyst recommendations and earnings.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Choice Hotels International and Penn National Gaming, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Choice Hotels International 2 6 0 0 1.75
Penn National Gaming 0 3 8 0 2.73



Choice Hotels International presently has a consensus target price of $81.14, suggesting a potential upside of 0.36%. Penn National Gaming has a consensus target price of $33.70, suggesting a potential upside of 1.48%. Given Penn National Gaming’s stronger consensus rating and higher probable upside, analysts clearly believe Penn National Gaming is more favorable than Choice Hotels International.

Institutional and Insider Ownership

51.8% of Choice Hotels International shares are owned by institutional investors. Comparatively, 97.2% of Penn National Gaming shares are owned by institutional investors. 24.4% of Choice Hotels International shares are owned by company insiders. Comparatively, 10.6% of Penn National Gaming shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Dividends

Choice Hotels International pays an annual dividend of $0.86 per share and has a dividend yield of 1.1%. Penn National Gaming does not pay a dividend. Choice Hotels International pays out 29.9% of its earnings in the form of a dividend. Choice Hotels International has raised its dividend for 4 consecutive years.

Profitability

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

Net Margins Return on Equity Return on Assets
Choice Hotels International 10.92% -74.98% 17.84%
Penn National Gaming 17.04% -92.84% 1.61%

Earnings & Valuation

This table compares Choice Hotels International and Penn National Gaming’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Choice Hotels International $1.01 billion 4.55 $114.89 million $2.88 28.07
Penn National Gaming $3.15 billion 0.97 $473.46 million $8.98 3.70

Penn National Gaming has higher revenue and earnings than Choice Hotels International. Penn National Gaming 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.

Volatility and Risk

Choice Hotels International has a beta of 1.1, meaning that its share price is 10% more volatile than the S&P 500. Comparatively, Penn National Gaming has a beta of 1.46, meaning that its share price is 46% more volatile than the S&P 500.

Summary

Penn National Gaming beats Choice Hotels International on 10 of the 17 factors compared between the two stocks.

About Choice Hotels International

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 April 25, 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.

About Penn National Gaming

Penn National Gaming, Inc. owns and manages gaming and racing facilities, and operates video gaming terminals with a focus on slot machine entertainment. The company operates through Northeast, South/West, and Midwest segments. As of December 31, 2017, it operated 27 facilities in 17 jurisdictions, including California, Florida, Illinois, Indiana, Kansas, Maine, Massachusetts, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Pennsylvania, Texas, West Virginia, and Ontario, Canada. The company was formerly known as PNRC Corp. and changed its name to Penn National Gaming, Inc. in 1994. Penn National Gaming, Inc. was founded in 1972 and is based in Wyomissing, Pennsylvania.

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