Red Lion Hotels (NYSE:RLH) and Penn National Gaming (NASDAQ:PENN) are both consumer discretionary companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, earnings, dividends, profitability, valuation, risk and analyst recommendations.

Institutional and Insider Ownership

75.6% of Red Lion Hotels shares are held by institutional investors. Comparatively, 95.5% of Penn National Gaming shares are held by institutional investors. 19.7% of Red Lion Hotels 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, large money managers and endowments believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares Red Lion Hotels and Penn National Gaming’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Red Lion Hotels $135.85 million 1.49 $1.96 million ($0.45) -18.31
Penn National Gaming $3.59 billion 0.69 $93.51 million $0.93 22.82

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

Analyst Ratings

This is a summary of recent ratings and price targets for Red Lion Hotels and Penn National Gaming, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Red Lion Hotels 0 0 1 0 3.00
Penn National Gaming 0 3 6 0 2.67

Red Lion Hotels currently has a consensus target price of $13.00, indicating a potential upside of 57.77%. Penn National Gaming has a consensus target price of $33.27, indicating a potential upside of 56.79%. Given Red Lion Hotels’ stronger consensus rating and higher probable upside, equities research analysts clearly believe Red Lion Hotels is more favorable than Penn National Gaming.

Profitability

This table compares Red Lion Hotels and Penn National Gaming’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Red Lion Hotels 1.44% -9.57% -6.65%
Penn National Gaming 2.61% 47.01% 1.42%

Volatility & Risk

Red Lion Hotels has a beta of 0.93, meaning that its share price is 7% less volatile than the S&P 500. Comparatively, Penn National Gaming has a beta of 1.85, meaning that its share price is 85% more volatile than the S&P 500.

Summary

Penn National Gaming beats Red Lion Hotels on 10 of the 14 factors compared between the two stocks.

Red Lion Hotels Company Profile

Red Lion Hotels Corporation, doing business as RLH Corporation, operates as a hospitality and leisure company the United States. It operates in two segments, Company Operated Hotels and Franchised Hotels. The company owns, manages, and franchises upscale, midscale, and economy hotels under the Hotel RL, Red Lion Hotels, Red Lion Inn & Suites, GuestHouse, Settle Inn, Americas Best Value Inn, Canadas Best Value Inn, Signature and Signature Inn, Knights Inn, and Country Hearth Inns & Suites brands. It also develops technology and system offerings for the hospitality industry. As of December 31, 2018, it had a network of 1,318 franchised hotels, including a total of 83,800 rooms. The company was formerly known as WestCoast Hospitality Corporation and changed its name to Red Lion Hotels Corporation in September 2005. Red Lion Hotels Corporation was founded in 1937 and is headquartered in Denver, Colorado.

Penn National Gaming Company Profile

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 four segments: Northeast, South, West, and Midwest. As of December 31, 2018, it owned, managed, or had ownership interests in 40 facilities in 18 jurisdictions. 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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