Sohu.com (NASDAQ: SOHU) and Zynga (NASDAQ:ZNGA) are both mid-cap computer and technology companies, but which is the superior business? We will contrast the two businesses based on the strength of their dividends, institutional ownership, risk, earnings, profitabiliy, analyst recommendations and valuation.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Sohu.com and Zynga, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sohu.com 1 4 1 0 2.00
Zynga 0 4 8 0 2.67

Sohu.com currently has a consensus target price of $52.58, indicating a potential downside of 7.73%. Zynga has a consensus target price of $3.97, indicating a potential upside of 11.28%. Given Zynga’s stronger consensus rating and higher possible upside, analysts clearly believe Zynga is more favorable than Sohu.com.

Insider & Institutional Ownership

62.5% of Sohu.com shares are owned by institutional investors. Comparatively, 66.1% of Zynga shares are owned by institutional investors. 21.0% of Sohu.com shares are owned by insiders. Comparatively, 12.4% of Zynga shares are owned by 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.

Volatility & Risk

Sohu.com has a beta of 1.4, meaning that its share price is 40% more volatile than the S&P 500. Comparatively, Zynga has a beta of 0.86, meaning that its share price is 14% less volatile than the S&P 500.

Profitability

This table compares Sohu.com and Zynga’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sohu.com -17.93% -18.90% -11.52%
Zynga -10.50% -3.83% -3.23%

Valuation and Earnings

This table compares Sohu.com and Zynga’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Sohu.com $1.62 billion 1.37 $34.28 million ($7.70) -7.40
Zynga $776.48 million 3.97 -$67.67 million ($0.09) -39.66

Sohu.com has higher revenue and earnings than Zynga. Zynga is trading at a lower price-to-earnings ratio than Sohu.com, indicating that it is currently the more affordable of the two stocks.

Summary

Zynga beats Sohu.com on 9 of the 13 factors compared between the two stocks.

Sohu.com Company Profile

Sohu.com Inc. (Sohu) is an online media, search and game service company, which is engaged in providing online products and services on personal computers (PCs) and mobile devices in the People’s Republic of China (the PRC). The Company operates through three segments: the Sohu segment; the Sogou segment, and the Changyou segment. The Sohu segment’s business is the brand advertising business, which offers to users, over its matrices of Chinese language online media, various content, products and services across multiple Internet-enabled devices, such as PCs, mobile phones and tablets. The search and search-related business primarily offers advertisers pay-for-click services, as well as online marketing services on Web directories operated by Sogou. Changyou’s business lines consist of the online game business; the platform channel business, which consists primarily of online advertising and also includes Internet value-added services (IVAS), and the cinema advertising business.

Zynga Company Profile

Zynga Inc. is a provider of social game services. The Company develops, markets and operates social games as live services played on mobile platforms, such as iPhone Operating System (iOS) operating system and Android operating system and social networking sites, such as Facebook. The Company has developed a range of social games, including games in its Slots, Words With Friends, Zynga Poker and FarmVille franchises. It operates its games as live services and updates them with new features. It analyzes the data generated by its players’ game play and social interactions to guide the creation of new content and features. The Company operates its games as live services that are available anytime and anywhere. The Company invests in game categories, including Social Casino, Casual, Action Strategy and Invest Express. Social Casino includes Zynga Poker and its Slots games, such as Hit It Rich! Slots, Wizard of Oz Slots, Willy Wonka and the Chocolate Factory Slots, and Black Diamond Casino.

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