Critical Analysis: China Lodging Group (HTHT) and Penn National Gaming (PENN)

China Lodging Group (NASDAQ: HTHT) and Penn National Gaming (NASDAQ:PENN) are both consumer discretionary companies, but which is the better stock? We will compare the two businesses based on the strength of their profitability, earnings, analyst recommendations, dividends, risk, institutional ownership and valuation.

Volatility & Risk

China Lodging Group has a beta of 1.7, indicating that its stock price is 70% more volatile than the S&P 500. Comparatively, Penn National Gaming has a beta of 1.46, indicating that its stock price is 46% more volatile than the S&P 500.

Institutional & Insider Ownership

9.4% of China Lodging Group shares are held by institutional investors. Comparatively, 97.3% of Penn National Gaming shares are held by institutional investors. 49.4% of China Lodging Group shares are held by insiders. Comparatively, 10.6% of Penn National Gaming shares are held by 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 China Lodging Group and Penn National Gaming’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
China Lodging Group $1.26 billion 11.10 $190.15 million $0.65 73.60
Penn National Gaming $3.15 billion 0.98 $473.46 million $8.98 3.76

Penn National Gaming has higher revenue and earnings than China Lodging Group. Penn National Gaming is trading at a lower price-to-earnings ratio than China Lodging Group, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares China Lodging Group and Penn National Gaming’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
China Lodging Group 13.89% 21.24% 7.74%
Penn National Gaming 17.04% -92.84% 1.61%

Analyst Recommendations

This is a breakdown of current recommendations and price targets for China Lodging Group and Penn National Gaming, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
China Lodging Group 0 0 5 0 3.00
Penn National Gaming 0 3 7 0 2.70

China Lodging Group currently has a consensus price target of $44.60, suggesting a potential downside of 6.77%. Penn National Gaming has a consensus price target of $33.00, suggesting a potential downside of 2.16%. Given Penn National Gaming’s higher probable upside, analysts clearly believe Penn National Gaming is more favorable than China Lodging Group.

About China Lodging Group

China Lodging Group, Limited, together with its subsidiaries, develops and operates leased and owned, manachised, and franchised hotels primarily in the People's Republic of China. The company operates hotels under the Hi Inn, HanTing Hotel, Elan Hotel, Orange Hotel, HanTing Premium, Starway Hotel, JI Hotel, Orange Hotel Select, Manxin Hotel, Crystal Orange Hotel, Joya Hotel, Grand Mercure, Novotel, Mercure, Ibis Styles, and Ibis brand names for business and leisure travelers. As of December 31, 2017, it had 671 leased and owned hotels; 2,874 manachised hotels; and 201 franchised hotels in operation, as well as 37 leased and owned hotels, and 659 manachised and franchised hotels under development. China Lodging Group, Limited was incorporated in 2007 and is headquartered in Shanghai, the People's Republic of China.

About Penn National Gaming

Penn National Gaming, Inc. owns and manages gaming and racing facilities, and operates video gaming terminals with a focus on slot machine entertainment. The company operates through Northeast, South/West, and Midwest segments. As of December 31, 2017, it operated 27 facilities in 17 jurisdictions, including California, Florida, Illinois, Indiana, Kansas, Maine, Massachusetts, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Pennsylvania, Texas, West Virginia, and Ontario, Canada. The company was formerly known as PNRC Corp. and changed its name to Penn National Gaming, Inc. in 1994. Penn National Gaming, Inc. was founded in 1972 and is based in Wyomissing, Pennsylvania.

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