DreamWorks Animation (NASDAQ: DWA) and Time Warner (NYSE:TWX) are both cyclical consumer goods & services companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, profitabiliy, analyst recommendations, valuation, institutional ownership, dividends and risk.

Risk and Volatility

DreamWorks Animation has a beta of 0.75, indicating that its share price is 25% less volatile than the S&P 500. Comparatively, Time Warner has a beta of 1.05, indicating that its share price is 5% more volatile than the S&P 500.

Valuation & Earnings

This table compares DreamWorks Animation and Time Warner’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
DreamWorks Animation N/A N/A N/A $0.63 65.03
Time Warner $29.75 billion 2.65 $8.74 billion $5.23 19.44

Time Warner has higher revenue and earnings than DreamWorks Animation. Time Warner is trading at a lower price-to-earnings ratio than DreamWorks Animation, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares DreamWorks Animation and Time Warner’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
DreamWorks Animation 0.63% 0.80% 0.29%
Time Warner 13.90% 19.45% 7.28%

Insider & Institutional Ownership

79.9% of Time Warner shares are held by institutional investors. 0.2% of Time Warner shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Dividends

Time Warner pays an annual dividend of $1.61 per share and has a dividend yield of 1.6%. DreamWorks Animation does not pay a dividend. Time Warner pays out 30.8% of its earnings in the form of a dividend. DreamWorks Animation has raised its dividend for 8 consecutive years.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for DreamWorks Animation and Time Warner, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
DreamWorks Animation 0 2 0 0 2.00
Time Warner 0 20 11 0 2.35

DreamWorks Animation currently has a consensus price target of $29.50, indicating a potential downside of 28.00%. Time Warner has a consensus price target of $100.86, indicating a potential downside of 0.78%. Given Time Warner’s stronger consensus rating and higher probable upside, analysts clearly believe Time Warner is more favorable than DreamWorks Animation.

Summary

Time Warner beats DreamWorks Animation on 12 of the 14 factors compared between the two stocks.

DreamWorks Animation Company Profile

Dreamworks Animation, LLC (DreamWorks Animation), formerly DreamWorks Animation SKG, Inc., creates and exploits branded family entertainment, including animated feature films, television series and specials, live entertainment properties and related consumer products. The Company’s segments include Feature Films, Television Series and Specials, Consumer Products, New Media and All Other. The Company has released a total of over 30 animated feature films, including the franchise properties Shrek, Madagascar, Kung Fu Panda and How to Train Your Dragon.

Time Warner Company Profile

Time Warner Inc. is a media and entertainment company. The Company operates through three segments: Turner, which consists of cable networks and digital media properties; Home Box Office, which consists of premium pay television and over the top (OTT) services and premium pay, basic tier television and OTT services internationally, and Warner Bros., which consists of television, feature film, home video, and videogame production and distribution. It also holds interests in companies that operate broadcast networks. The Company holds interest in Central European Media Enterprises Ltd. (CME), which is a broadcasting company that operates television networks in Bulgaria, Croatia, the Czech Republic, Romania, the Slovak Republic and Slovenia and The CW broadcast network (The CW), which includes a lineup of advertising-supported original programming, such as The 100, Arrow, Crazy Ex-Girlfriend, DC’s Legends of Tomorrow, The Flash, Frequency, iZombie, Jane the Virgin and No Tomorrow.

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