Extended Stay America (NYSE: STAY) and Choice Hotels International (NYSE:CHH) are both mid-cap cyclical consumer goods & services companies, but which is the better stock? We will contrast the two businesses based on the strength of their institutional ownership, valuation, analyst recommendations, profitability, risk, dividends and earnings.

Insider and Institutional Ownership

98.5% of Extended Stay America shares are owned by institutional investors. Comparatively, 50.8% of Choice Hotels International shares are owned by institutional investors. 0.6% of Extended Stay America shares are owned by insiders. Comparatively, 22.0% of Choice Hotels International shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares Extended Stay America and Choice Hotels International’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Extended Stay America $1.27 billion 2.65 $69.93 million $0.39 44.92
Choice Hotels International $924.64 million 4.76 $139.37 million $2.70 28.83

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

Dividends

Extended Stay America pays an annual dividend of $0.84 per share and has a dividend yield of 4.8%. Choice Hotels International pays an annual dividend of $0.86 per share and has a dividend yield of 1.1%. Extended Stay America pays out 215.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Choice Hotels International pays out 31.9% of its earnings in the form of a dividend. Extended Stay America has raised its dividend for 3 consecutive years and Choice Hotels International has raised its dividend for 2 consecutive years. Extended Stay America is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Extended Stay America and Choice Hotels International, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Extended Stay America 0 1 7 0 2.88
Choice Hotels International 1 5 1 0 2.00

Extended Stay America presently has a consensus target price of $20.53, indicating a potential upside of 17.19%. Choice Hotels International has a consensus target price of $64.17, indicating a potential downside of 17.58%. Given Extended Stay America’s stronger consensus rating and higher possible upside, research analysts plainly believe Extended Stay America is more favorable than Choice Hotels International.

Profitability

This table compares Extended Stay America and Choice Hotels International’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Extended Stay America 5.83% 14.53% 4.74%
Choice Hotels International 15.66% -60.41% 17.42%

Volatility & Risk

Extended Stay America has a beta of 0.98, indicating that its share price is 2% less volatile than the S&P 500. Comparatively, Choice Hotels International has a beta of 1.17, indicating that its share price is 17% more volatile than the S&P 500.

Summary

Choice Hotels International beats Extended Stay America on 9 of the 17 factors compared between the two stocks.

Extended Stay America Company Profile

Extended Stay America, Inc. is a owner/operator of company-branded hotels in North America. The Company operates in the extended stay lodging industry. The Company owns and operates approximately 700 hotel properties consisting of approximately 75,900 rooms located in 44 states across the United States of America and in Canada. The Company owns and operates hotels under the core brand, Extended Stay America. In addition, the Company owns and operates three Extended Stay Canada hotels, 49 hotels in the economy extended stay segment under the Crossland Economy Studios and Hometown Inn brands, and also manage two Extended Stay America hotels.

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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