Morgans Hotel Group (NASDAQ: MHGC) and Choice Hotels International (NYSE:CHH) are both cyclical consumer goods & services companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitabiliy, valuation, earnings, dividends, risk, analyst recommendations and institutional ownership.

Insider & Institutional Ownership

33.2% of Morgans Hotel Group shares are owned by institutional investors. Comparatively, 49.8% of Choice Hotels International shares are owned by institutional investors. 1.8% of Morgans Hotel Group shares are owned by company insiders. Comparatively, 22.0% of Choice Hotels International shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Morgans Hotel Group and Choice Hotels International, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Morgans Hotel Group 0 0 0 0 N/A
Choice Hotels International 1 3 2 0 2.17

Choice Hotels International has a consensus target price of $58.75, suggesting a potential downside of 9.06%. Given Choice Hotels International’s higher possible upside, analysts clearly believe Choice Hotels International is more favorable than Morgans Hotel Group.

Volatility and Risk

Morgans Hotel Group has a beta of 1.73, suggesting that its stock price is 73% more volatile than the S&P 500. Comparatively, Choice Hotels International has a beta of 1.11, suggesting that its stock price is 11% more volatile than the S&P 500.

Dividends

Choice Hotels International pays an annual dividend of $0.86 per share and has a dividend yield of 1.3%. Morgans Hotel Group does not pay a dividend. Choice Hotels International pays out 33.2% of its earnings in the form of a dividend. Choice Hotels International has raised its dividend for 3 consecutive years.

Profitability

This table compares Morgans Hotel Group and Choice Hotels International’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Morgans Hotel Group -17.23% N/A -6.56%
Choice Hotels International 16.05% -45.12% 17.22%

Valuation and Earnings

This table compares Morgans Hotel Group and Choice Hotels International’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Morgans Hotel Group N/A N/A N/A $0.23 9.35
Choice Hotels International $915.42 million 3.96 $272.73 million $2.59 24.94

Choice Hotels International has higher revenue and earnings than Morgans Hotel Group. Morgans Hotel Group 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.

Summary

Choice Hotels International beats Morgans Hotel Group on 10 of the 13 factors compared between the two stocks.

Morgans Hotel Group Company Profile

Morgans Hotel Group Co. is a lifestyle hospitality company. The Company operates, owns, licenses and develops boutique hotels, primarily in gateway cities and select resort markets in the United States, Europe and other international locations. Its portfolio of Morgans Hotel Group branded hotel properties and food and beverage operations and entities consists of its over three owned hotels, including Hudson in New York, Delano South Beach in Miami Beach and Clift in San Francisco; its owned food and beverage operations consisting of leasehold interests in the food and beverage operations located at Sanderson, in London; its unconsolidated Joint Venture Hotel, including Mondrian South Beach in Miami Beach; its over seven Managed Hotels consisting of Royalton and Morgans in New York, Shore Club in Miami Beach, Mondrian in Los Angeles, and Sanderson, St Martins Lane and Mondrian London in London, and its licensed hotel, Delano Las Vegas, and its franchised hotel, 10 Karakoy, in Istanbul.

Choice Hotels International Company Profile

Choice Hotels International, Inc. is a hotel franchisor. The Company’s segments include Hotel Franchising, SkyTouch Technology and Corporate & Other. It franchises lodging properties under brand names, including 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. The Company had 6,514 hotels open and 775 hotels under construction, awaiting conversion or approved for development, as of December 31, 2016, representing 516,122 rooms open and 62,547 rooms under construction, awaiting conversion or approved for development in 50 states, the District of Columbia and over 40 countries and territories outside the United States. Its domestic franchising operations are conducted through direct franchising relationships, while its international franchise operations are conducted through a combination of direct franchising and master franchising relationships.

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