Analyzing Churchill Downs (NASDAQ:CHDN) and Electronic Arts (NASDAQ:EA)

Churchill Downs (NASDAQ:CHDN) and Electronic Arts (NASDAQ:EA) are both consumer discretionary companies, but which is the better investment? We will contrast the two businesses based on the strength of their dividends, profitability, risk, earnings, analyst recommendations, institutional ownership and valuation.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Churchill Downs and Electronic Arts, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Churchill Downs	0	0	10	0	3.00
Electronic Arts	0	15	11	2	2.54

Churchill Downs presently has a consensus target price of $136.50, indicating a potential upside of 33.07%. Electronic Arts has a consensus target price of $167.1154, indicating a potential downside of 4.33%. Given Churchill Downs’ stronger consensus rating and higher possible upside, analysts plainly believe Churchill Downs is more favorable than Electronic Arts.

Dividends

Churchill Downs pays an annual dividend of $0.41 per share and has a dividend yield of 0.4%. Electronic Arts pays an annual dividend of $0.76 per share and has a dividend yield of 0.4%. Churchill Downs pays out 7.0% of its earnings in the form of a dividend. Electronic Arts pays out 19.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Churchill Downs has raised its dividend for 14 consecutive years.

Volatility and Risk

Churchill Downs has a beta of 0.95, suggesting that its share price is 5% less volatile than the S&P 500. Comparatively, Electronic Arts has a beta of 0.72, suggesting that its share price is 28% less volatile than the S&P 500.

Institutional & Insider Ownership

82.6% of Churchill Downs shares are held by institutional investors. Comparatively, 90.2% of Electronic Arts shares are held by institutional investors. 5.3% of Churchill Downs shares are held by company insiders. Comparatively, 0.2% of Electronic Arts shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares Churchill Downs and Electronic Arts”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Churchill Downs	$2.73 billion	2.63	$426.80 million	$5.82	17.63
Electronic Arts	$7.46 billion	5.86	$1.12 billion	$3.99	43.78

Electronic Arts has higher revenue and earnings than Churchill Downs. Churchill Downs is trading at a lower price-to-earnings ratio than Electronic Arts, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Churchill Downs and Electronic Arts’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Churchill Downs	15.22%	41.46%	6.10%
Electronic Arts	13.94%	18.43%	9.93%

About Churchill Downs

Churchill Downs Incorporated operates as a racing, online wagering, and gaming entertainment company in the United States. It operates through three segments: Live and Historical Racing, TwinSpires, and Gaming. The company operates pari-mutuel gaming entertainment venues; TwinSpires, an online wagering platform for horse racing, sports, and iGaming; retail sports books; casino gaming; and Terre Haute Casino Resort. It also offers streaming video of live horse races, replays, and an assortment of racing and handicapping information; and provides the Bloodstock Research Information Services platform for horse racing statistical data. In addition, the company manufactures and operates pari-mutuel wagering systems for racetracks, off-track betting facilities, and other pari-mutuel wagering businesses. Churchill Downs Incorporated was founded in 1875 and is headquartered in Louisville, Kentucky.

About Electronic Arts

Electronic Arts Inc. develops, markets, publishes, and distributes games, content, and services for game consoles, PCs, mobile phones, and tablets worldwide. It develops and publishes games and services across various genres, such as sports, racing, first-person shooter, action, role-playing, and simulation primarily under the Battlefield, The Sims, Apex Legends, Need for Speed, and license games from others, including FIFA, Madden NFL, UFC, and Star Wars brands. The company licenses its games to third parties to distribute and host its games. It markets and sells its games and services through digital distribution and retail channels, as well as directly to mass market retailers, specialty stores, and distribution arrangements. Electronic Arts Inc. was incorporated in 1982 and is headquartered in Redwood City, California.