Sunstone Hotel Investors (SHO) & Boyd Gaming (BYD) Critical Analysis

Sunstone Hotel Investors (NYSE:SHO) and Boyd Gaming (NYSE:BYD) are both mid-cap finance companies, but which is the better stock? We will contrast the two companies based on the strength of their earnings, institutional ownership, profitability, analyst recommendations, risk, valuation and dividends.

Dividends

Sunstone Hotel Investors pays an annual dividend of $2.16 per share and has a dividend yield of 15.4%. Boyd Gaming pays an annual dividend of $0.24 per share and has a dividend yield of 0.9%. Sunstone Hotel Investors pays out 177.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Boyd Gaming pays out 23.3% of its earnings in the form of a dividend. Sunstone Hotel Investors has raised its dividend for 2 consecutive years. Sunstone Hotel Investors is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Sunstone Hotel Investors and Boyd Gaming’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sunstone Hotel Investors 16.56% 7.84% 5.03%
Boyd Gaming 7.19% 12.53% 2.86%

Risk and Volatility

Sunstone Hotel Investors has a beta of 1.13, suggesting that its stock price is 13% more volatile than the S&P 500. Comparatively, Boyd Gaming has a beta of 1.94, suggesting that its stock price is 94% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current recommendations for Sunstone Hotel Investors and Boyd Gaming, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sunstone Hotel Investors 0 6 1 0 2.14
Boyd Gaming 0 1 10 0 2.91

Sunstone Hotel Investors currently has a consensus target price of $16.43, indicating a potential upside of 16.93%. Boyd Gaming has a consensus target price of $38.30, indicating a potential upside of 45.96%. Given Boyd Gaming’s stronger consensus rating and higher possible upside, analysts clearly believe Boyd Gaming is more favorable than Sunstone Hotel Investors.

Institutional & Insider Ownership

71.8% of Boyd Gaming shares are owned by institutional investors. 0.9% of Sunstone Hotel Investors shares are owned by company insiders. Comparatively, 28.9% of Boyd Gaming shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares Sunstone Hotel Investors and Boyd Gaming’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Sunstone Hotel Investors $1.19 billion 2.69 $145.37 million $1.22 11.52
Boyd Gaming $2.38 billion 1.24 $189.19 million $1.03 25.48

Boyd Gaming has higher revenue and earnings than Sunstone Hotel Investors. Sunstone Hotel Investors is trading at a lower price-to-earnings ratio than Boyd Gaming, indicating that it is currently the more affordable of the two stocks.

Summary

Boyd Gaming beats Sunstone Hotel Investors on 11 of the 17 factors compared between the two stocks.

About Sunstone Hotel Investors

Sunstone Hotel Investors, Inc. is a lodging real estate investment trust ("REIT") that as of November 5, 2018 has interests in 22 hotels comprised of 11,176 rooms. Sunstone's primary business is to acquire, own, asset manage and renovate hotels considered to be Long-Term Relevant Real Estate, the majority of which are operated under nationally recognized brands, such as Marriott, Hilton and Hyatt.

About Boyd Gaming

Boyd Gaming Corporation, together with its subsidiaries, operates as a multi-jurisdictional gaming company. It operates through three segments: Las Vegas Locals, Downtown Las Vegas, and Midwest and South. As of October 15, 2018, the company operated 29 gaming entertainment properties offering a total of 1.76 million square feet of casino space, approximately 38,000 gaming machines, 900 table games, 11,000 hotel rooms, and 320 food and beverage outlets located in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio, and Pennsylvania. It also owns and operates a travel agency in Hawaii. Boyd Gaming Corporation was founded in 1975 and is headquartered in Las Vegas, Nevada.

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