Contrasting King Digital Entertainment PLC (KING) & Rosetta Stone (RST)

King Digital Entertainment PLC (NYSE: KING) and Rosetta Stone (NYSE:RST) are both application software companies, but which is the better stock? We will compare the two businesses based on the strength of their valuation, earnings, analyst recommendations, institutional ownership, profitability, dividends and risk.

Profitability

This table compares King Digital Entertainment PLC and Rosetta Stone’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
King Digital Entertainment PLC 19.58% 33.71% 24.95%
Rosetta Stone -4.97% -926.26% -3.43%

Analyst Ratings

This is a breakdown of recent recommendations for King Digital Entertainment PLC and Rosetta Stone, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
King Digital Entertainment PLC 0 0 0 0 N/A
Rosetta Stone 0 0 1 0 3.00

Rosetta Stone has a consensus price target of C$15.00, suggesting a potential upside of 39.02%. Given Rosetta Stone’s higher probable upside, analysts clearly believe Rosetta Stone is more favorable than King Digital Entertainment PLC.

Institutional and Insider Ownership

73.4% of Rosetta Stone shares are held by institutional investors. 13.0% of Rosetta Stone shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares King Digital Entertainment PLC and Rosetta Stone’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
King Digital Entertainment PLC N/A N/A N/A $1.75 10.29
Rosetta Stone $194.09 million 1.24 -$27.55 million C($0.42) -25.69

King Digital Entertainment PLC has higher revenue, but lower earnings than Rosetta Stone. Rosetta Stone is trading at a lower price-to-earnings ratio than King Digital Entertainment PLC, indicating that it is currently the more affordable of the two stocks.

Summary

Rosetta Stone beats King Digital Entertainment PLC on 5 of the 9 factors compared between the two stocks.

King Digital Entertainment PLC Company Profile

King Digital Entertainment plc is an interactive entertainment company for the mobile world. The Company has four franchises: Candy Crush, Farm Heroes, Bubble Witch and Pet Rescue. The Company develops and publishes games that can be played on its king.com and royalgames.com Websites, Facebook and, mobile platforms, such as iOS and Android. The Company is involved in developing and monetizing digital games on multiple platforms. The Company’s games include Candy Crush Saga, Candy Crush Soda Saga, Farm Heroes Saga, Pet Rescue Saga and Bubble Witch 2 Saga. As of December 31, 2014, the Company had 533 million monthly active users (MAUs), 149 million daily active users (DAUs), 356 million monthly unique users (MUUs) and 8,344 million monthly unique payers (MUPs).

Rosetta Stone Company Profile

Rosetta Stone Inc. (Rosetta Stone) offers personalized language and reading programs. The Company’s solutions are used by schools, businesses, government organizations and individuals around the world. Its segments include Enterprise & Education, which derives revenues from sales to educational institutions, corporations and government agencies worldwide, and Consumer, which derives revenue from sales to individuals and retail partners. Its cloud-based programs allow users to learn online or on-the-go via tablet or smartphone, whether in a classroom, corporate setting, or personal learning environment. Its Fit Brains business offers personalized brain training programs. The Company offers courses in over 30 languages across formats, including Web-based software subscriptions, digital downloads, mobile applications, and perpetual compact disc packages. It also offers a portfolio of technology-based learning products for personal use to the global consumer.

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