Eldorado Resorts (ERI) and Choice Hotels International (CHH) Critical Review

Choice Hotels International (NYSE:CHH) and Eldorado Resorts (NASDAQ:ERI) are both mid-cap consumer discretionary companies, but which is the better stock? We will compare the two companies based on the strength of their profitability, institutional ownership, valuation, earnings, dividends, analyst recommendations and risk.

Dividends

Choice Hotels International pays an annual dividend of $0.86 per share and has a dividend yield of 1.2%. Eldorado Resorts does not pay a dividend. Choice Hotels International pays out 29.9% of its earnings in the form of a dividend.

Profitability

This table compares Choice Hotels International and Eldorado Resorts’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Choice Hotels International 17.26% -98.61% 19.52%
Eldorado Resorts 10.21% 12.38% 3.21%

Earnings and Valuation

This table compares Choice Hotels International and Eldorado Resorts’ gross 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 4.16 $114.89 million $2.88 25.96
Eldorado Resorts $1.47 billion 2.28 $73.93 million $0.01 4,333.00

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

Insider & Institutional Ownership

56.3% of Choice Hotels International shares are held by institutional investors. Comparatively, 95.6% of Eldorado Resorts shares are held by institutional investors. 24.4% of Choice Hotels International shares are held by company insiders. Comparatively, 1.5% of Eldorado Resorts shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Volatility & Risk

Choice Hotels International has a beta of 1.05, suggesting that its stock price is 5% more volatile than the S&P 500. Comparatively, Eldorado Resorts has a beta of 1.66, suggesting that its stock price is 66% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current recommendations and price targets for Choice Hotels International and Eldorado Resorts, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Choice Hotels International 2 6 1 0 1.89
Eldorado Resorts 0 1 7 0 2.88

Choice Hotels International presently has a consensus price target of $80.63, suggesting a potential upside of 7.83%. Eldorado Resorts has a consensus price target of $52.93, suggesting a potential upside of 22.16%. Given Eldorado Resorts’ stronger consensus rating and higher probable upside, analysts clearly believe Eldorado Resorts is more favorable than Choice Hotels International.

Summary

Eldorado Resorts beats Choice Hotels International on 9 of the 16 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 October 31, 2018, the company had approximately 6,800 franchised hotels with 550,000 rooms in approximately 40 countries and territories. Choice Hotels International, Inc. was founded in 1939 and is based in Rockville, Maryland.

About Eldorado Resorts

Eldorado Resorts, Inc., a gaming and hospitality company, owns and operates gaming facilities in Ohio, Louisiana, Nevada, Pennsylvania, West Virginia, Colorado, Florida, Iowa, Mississippi, and Missouri. It owns and operates Eldorado Resort Casino Reno, a 814-room hotel, casino and entertainment facility; Silver Legacy Resort Casino, a 1,711-room themed hotel and casino; Circus Circus Reno, a 1,571-room hotel-casino and entertainment complex; Eldorado Resort Casino Shreveport, a 403-room, all suite art deco-style hotel and tri-level riverboat dockside casino; Mountaineer Casino, Racetrack & Resort, a 357-room hotel, casino, entertainment, and live thoroughbred horse racing facility; Presque Isle Downs & Casino, a casino and live thoroughbred horse racing facility; and Eldorado Gaming Scioto Downs, a modern racino. The company also owns and operates Isle Casino Hotel—Black Hawk, a land-based casino; Lady Luck Casino—Black Hawk, a land-based casino; Isle Casino Racing Pompano Park, a casino and harness racing track; Isle Casino Bettendorf, a land-based single-level casino; Isle Casino Waterloo, a SINGLE-level land-based casino; Isle of Capri Casino Hotel Lake Charles, a gaming vessel; Isle of Capri Casino Lula, a two dockside casino; Lady Luck Casino Vicksburg, a dockside casino; Isle of Capri Casino Boonville, a single-level dockside casino; Isle Casino Cape Girardeau, a dockside casino and pavilion and entertainment center; Lady Luck Casino Caruthersville, a riverboat casino; Isle of Capri Casino Kansas City, a dockside casino; and Lady Luck Casino Nemacolin, a casino property, as well as operates Racelinebet.com, which offers online and telephone wagering services on horse races. As of December 31, 2017, it owned and operated approximately 950,000 square feet of casino space with approximately 21,000 slot machines and video lottery terminals, 600 table and poker games, and 7,000 hotel rooms. Eldorado Resorts, Inc. was founded in 1973 and is based in Reno, Nevada.

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