Melco Crown Entertainment Limited (NASDAQ: MLCO) and Red Rock Resorts (NASDAQ:RRR) are both mid-cap consumer discretionary companies, but which is the better stock? We will contrast the two businesses based on the strength of their analyst recommendations, dividends, risk, valuation, earnings, profitability and institutional ownership.

Volatility and Risk

Melco Crown Entertainment Limited has a beta of 1.84, indicating that its stock price is 84% more volatile than the S&P 500. Comparatively, Red Rock Resorts has a beta of 0.7, indicating that its stock price is 30% less volatile than the S&P 500.

Dividends

Melco Crown Entertainment Limited pays an annual dividend of $0.30 per share and has a dividend yield of 1.2%. Red Rock Resorts pays an annual dividend of $0.40 per share and has a dividend yield of 1.7%. Melco Crown Entertainment Limited pays out 57.7% of its earnings in the form of a dividend. Red Rock Resorts pays out 83.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Insider and Institutional Ownership

39.9% of Melco Crown Entertainment Limited shares are held by institutional investors. Comparatively, 62.5% of Red Rock Resorts shares are held by institutional investors. 40.9% of Red Rock Resorts shares are held 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.

Profitability

This table compares Melco Crown Entertainment Limited and Red Rock Resorts’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Melco Crown Entertainment Limited 5.11% 9.20% 3.59%
Red Rock Resorts 1.44% 14.05% 2.50%

Analyst Recommendations

This is a breakdown of current ratings for Melco Crown Entertainment Limited and Red Rock Resorts, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Melco Crown Entertainment Limited 0 3 11 0 2.79
Red Rock Resorts 0 2 9 0 2.82

Melco Crown Entertainment Limited presently has a consensus target price of $23.15, indicating a potential downside of 4.16%. Red Rock Resorts has a consensus target price of $26.25, indicating a potential upside of 11.28%. Given Red Rock Resorts’ stronger consensus rating and higher possible upside, analysts plainly believe Red Rock Resorts is more favorable than Melco Crown Entertainment Limited.

Valuation and Earnings

This table compares Melco Crown Entertainment Limited and Red Rock Resorts’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Melco Crown Entertainment Limited $4.92 billion 2.40 $1.11 billion $0.52 46.44
Red Rock Resorts $1.56 billion 1.03 $497.16 million $0.48 49.15

Melco Crown Entertainment Limited has higher revenue and earnings than Red Rock Resorts. Melco Crown Entertainment Limited is trading at a lower price-to-earnings ratio than Red Rock Resorts, indicating that it is currently the more affordable of the two stocks.

Summary

Melco Crown Entertainment Limited beats Red Rock Resorts on 10 of the 16 factors compared between the two stocks.

Melco Crown Entertainment Limited Company Profile

Melco Resorts & Entertainment Limited, formerly Melco Crown Entertainment Limited, is a holding company. The Company, through its subsidiaries, develops, owns and operates casino gaming and entertainment casino resort facilities in Asia. It is principally engaged in the gaming and hospitality business in Asia and its principal operating and developmental activities occur in over two geographic areas, which include Macau and the Philippines. Its segments include City of Dreams, Altira Macau, Studio City, Mocha Clubs, City of Dreams Manila, and Corporate and Others. It has over three casino based operations in Macau, namely, City of Dreams, Altira Macau and Studio City, and non-casino based operations in Macau at its Mocha Clubs. It also has a casino based operation in the Philippines, City of Dreams Manila. It is developing the fifth hotel tower at City of Dreams in Cotai, Macau. Its other operations also include Taipa Square Casino, Macau operating within Hotel Taipa Square.

Red Rock Resorts Company Profile

Red Rock Resorts, Inc. is a gaming, development and management company. The Company’s segments include Las Vegas operations, Native American management, and Corporate and other. The Las Vegas operations segment includes all of its Las Vegas area casino properties and the Native American management segment includes its Native American management arrangements. It provides gaming and entertainment for residents of the Las Vegas regional market and visitors. Its Las Vegas portfolio includes approximately 10 gaming and entertainment facilities and over 10 smaller casinos, offering approximately 20,300 slot machines, over 350 table games and approximately 4,750 hotel rooms. The Company offers a range of gaming and non-gaming entertainment options. It also controls over seven gaming-entitled development sites consisting of approximately 398 acres in Las Vegas and Reno, Nevada. The Company manages and owns interest in Station Casinos LLC, which is the provider of gaming and entertainment.

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