Head-To-Head Contrast: Extended Stay America (STAY) vs. MGM Resorts International (MGM)

Extended Stay America (NYSE: STAY) and MGM Resorts International (NYSE:MGM) are both consumer discretionary companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, risk, dividends, earnings, analyst recommendations, institutional ownership and profitability.

Dividends

Extended Stay America pays an annual dividend of $0.88 per share and has a dividend yield of 3.9%. MGM Resorts International pays an annual dividend of $0.48 per share and has a dividend yield of 1.6%. Extended Stay America pays out 88.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. MGM Resorts International pays out 47.1% of its earnings in the form of a dividend. Extended Stay America has increased its dividend for 3 consecutive years. Extended Stay America is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

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

Net Margins Return on Equity Return on Assets
Extended Stay America 5.47% 15.18% 4.97%
MGM Resorts International 17.88% 5.45% 2.05%

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Extended Stay America and MGM Resorts International, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Extended Stay America 0 0 9 0 3.00
MGM Resorts International 0 3 10 0 2.77

Extended Stay America presently has a consensus price target of $22.17, suggesting a potential downside of 0.55%. MGM Resorts International has a consensus price target of $38.08, suggesting a potential upside of 25.42%. Given MGM Resorts International’s higher probable upside, analysts clearly believe MGM Resorts International is more favorable than Extended Stay America.

Valuation & Earnings

This table compares Extended Stay America and MGM Resorts International’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Extended Stay America $1.28 billion 3.30 $78.84 million $1.00 22.29
MGM Resorts International $10.77 billion 1.57 $1.96 billion $1.02 29.76

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

Insider and Institutional Ownership

96.1% of Extended Stay America shares are owned by institutional investors. Comparatively, 82.5% of MGM Resorts International shares are owned by institutional investors. 0.6% of Extended Stay America shares are owned by insiders. Comparatively, 12.2% of MGM Resorts International shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Volatility and Risk

Extended Stay America has a beta of 0.96, meaning that its stock price is 4% less volatile than the S&P 500. Comparatively, MGM Resorts International has a beta of 1.39, meaning that its stock price is 39% more volatile than the S&P 500.

Summary

MGM Resorts International beats Extended Stay America on 10 of the 17 factors compared between the two stocks.

Extended Stay America Company Profile

Extended Stay America, Inc., together with its subsidiaries, owns, operates, and manages hotels in the United States. As of February 27, 2018, it had 599 hotels and approximately 66,000 rooms, as well as managed 26 hotels under the Extended Stay America brand. It serves customers in the mid-priced extended stay segment. The company also relicenses Extended Stay America brand to unaffiliated third parties. Extended Stay America, Inc. was founded in 1995 and is headquartered in Charlotte, North Carolina.

MGM Resorts International Company Profile

MGM Resorts International, through its subsidiaries, owns and operates integrated casino, hotel, and entertainment resorts in the United States and China. The company operates through two segments, Domestic Resorts and MGM China. Its casino resorts offer gaming, hotel, convention, dining, entertainment, retail, and other resort amenities. Its casino operations include various slots, table games, and race and sports book wagering. The company operates 14 resorts in the United States; and MGM Macau resort and casino in China, as well as develops an integrated casino, hotel, and entertainment resort on the Cotai Strip, Macau. The company also owns and operates Shadow Creek golf course, Primm Valley Golf Club, and Fallen Oak golf course. The company serves premium gaming customers; leisure and wholesale travel customers; business travelers; and group customers, including conventions, trade associations, and small meetings. The company was formerly known as MGM MIRAGE and changed its name to MGM Resorts International in June 2010. MGM Resorts International was founded in 1986 and is based in Las Vegas, Nevada.

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