Electronic Arts (NASDAQ: EA) and Square (NYSE:SQ) are both mid-cap consumer discretionary companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, analyst recommendations, earnings, institutional ownership, valuation, profitability and risk.

Institutional and Insider Ownership

93.9% of Electronic Arts shares are held by institutional investors. Comparatively, 82.0% of Square shares are held by institutional investors. 2.6% of Electronic Arts shares are held by company insiders. Comparatively, 32.7% of Square shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares Electronic Arts and Square’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Electronic Arts $5.02 billion 7.27 $1.58 billion $3.74 31.63
Square $1.90 billion 5.36 -$41.20 million ($0.21) -126.33

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

Volatility and Risk

Electronic Arts has a beta of 0.68, suggesting that its stock price is 32% less volatile than the S&P 500. Comparatively, Square has a beta of 4.78, suggesting that its stock price is 378% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Electronic Arts and Square, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Electronic Arts 0 3 20 0 2.87
Square 0 10 17 0 2.63

Electronic Arts currently has a consensus target price of $115.92, indicating a potential downside of 1.99%. Square has a consensus target price of $24.19, indicating a potential downside of 8.83%. Given Electronic Arts’ stronger consensus rating and higher probable upside, equities analysts clearly believe Electronic Arts is more favorable than Square.

Profitability

This table compares Electronic Arts and Square’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Electronic Arts 23.31% 29.77% 15.74%
Square -4.13% -12.41% -5.36%

Summary

Electronic Arts beats Square on 11 of the 13 factors compared between the two stocks.

About Electronic Arts

Electronic Arts Inc. develops, markets, publishes and distributes games, content and services that can be played by consumers on a range of platforms, which include consoles, personal computers (PCs), mobile phones and tablets. The Company’s games and services are based on a portfolio of intellectual property that includes established brands, such as FIFA, Madden NFL, Star Wars, Battlefield, the Sims and Need for Speed. The Company markets and sells its games and services through retail channels and through digital distribution channels. The Company’s PC games and additional content can be downloaded directly through its Origin online platform, as well as through third-party online download stores. Its mobile, tablet and PC free-to-download games and additional content are available through third-party application storefronts, such as the Apple Application Store and Google Play.

About Square

Square, Inc. (Square) is a commerce ecosystem. The Company enables its sellers start, run and grow their businesses. It combines software with hardware to enable sellers to turn mobile devices and computing devices into payments and point-of-sale solutions. Once a seller downloads the Square Point of Sale mobile application, they can take their first payment. With its offering, a seller can accept payments in person via magnetic stripe (a swipe), Europay, MasterCard, and Visa (EMV) (a dip), or Near Field Communication (NFC) (a tap); or online via Square Invoices, Square Virtual Terminal, or the seller’s Website. Once on its system, sellers gain access to technology and features, such as reporting and analytics, next-day settlements, digital receipts, payment dispute management and chargeback protection, and Payment Card Industry (PCI) compliance. On the consumer (buyer) side, Square Cash offers individuals access to a way to send and receive money.

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