Red Lion Hotels (NYSE: RLH) and Extended Stay America (NYSE:STAY) are both cyclical consumer goods & services companies, but which is the superior business? We will contrast the two companies based on the strength of their valuation, earnings, profitability, dividends, analyst recommendations, risk and institutional ownership.

Dividends

Extended Stay America pays an annual dividend of $0.84 per share and has a dividend yield of 4.9%. Red Lion Hotels does not pay a dividend. Extended Stay America pays out 215.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Extended Stay America has raised its dividend for 2 consecutive years.

Profitability

This table compares Red Lion Hotels and Extended Stay America’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Red Lion Hotels -1.81% -2.53% -1.37%
Extended Stay America 5.83% 14.53% 4.74%

Analyst Ratings

This is a breakdown of current recommendations for Red Lion Hotels and Extended Stay America, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Red Lion Hotels 0 0 1 0 3.00
Extended Stay America 0 1 7 0 2.88

Red Lion Hotels currently has a consensus target price of $12.50, indicating a potential upside of 47.93%. Extended Stay America has a consensus target price of $20.53, indicating a potential upside of 19.09%. Given Red Lion Hotels’ stronger consensus rating and higher probable upside, analysts clearly believe Red Lion Hotels is more favorable than Extended Stay America.

Institutional and Insider Ownership

64.7% of Red Lion Hotels shares are owned by institutional investors. Comparatively, 99.5% of Extended Stay America shares are owned by institutional investors. 14.7% of Red Lion Hotels shares are owned by company insiders. Comparatively, 0.6% of Extended Stay America shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Volatility and Risk

Red Lion Hotels has a beta of 0.75, suggesting that its share price is 25% less volatile than the S&P 500. Comparatively, Extended Stay America has a beta of 1.05, suggesting that its share price is 5% more volatile than the S&P 500.

Valuation & Earnings

This table compares Red Lion Hotels and Extended Stay America’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Red Lion Hotels $164.07 million 1.22 -$4.67 million ($0.18) -46.94
Extended Stay America $1.27 billion 2.61 $69.93 million $0.39 44.21

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

Summary

Extended Stay America beats Red Lion Hotels on 12 of the 16 factors compared between the two stocks.

Red Lion Hotels Company Profile

Red Lion Hotels Corporation (RLHC) is a hospitality and leisure company. The Company is engaged in the franchising, management and ownership of hotels under the brands, including Hotel RL, Red Lion Hotel, Red Lion Inn & Suites, GuestHouse and Settle Inn & Suites (collectively the RLHC Brands). The RLHC brands represent upscale, midscale and economy hotels. The Company’s segments include company operated hotel segment, franchised hotels segment and other. The company operated hotel segment is engaged in guest room rentals, and food and beverage operations at its operated hotels. The franchised hotels segment is engaged in licensing its brands to franchisees. The franchised hotels segment offers various programs, which include its reservation system, guest loyalty program, national and regional sales, revenue management tools, quality inspections, advertising and brand standards.

Extended Stay America Company Profile

Extended Stay America, Inc. is a owner/operator of company-branded hotels in North America. The Company operates in the extended stay lodging industry. The Company owns and operates approximately 700 hotel properties consisting of approximately 75,900 rooms located in 44 states across the United States of America and in Canada. The Company owns and operates hotels under the core brand, Extended Stay America. In addition, the Company owns and operates three Extended Stay Canada hotels, 49 hotels in the economy extended stay segment under the Crossland Economy Studios and Hometown Inn brands, and also manage two Extended Stay America hotels.

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