Financial Review: PENN Entertainment (NASDAQ:PENN) versus GameStop (NYSE:GME)

GameStop (NYSE:GME) and PENN Entertainment (NASDAQ:PENN) are both consumer discretionary companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, analyst recommendations, dividends, profitability, earnings, risk and valuation.

Institutional & Insider Ownership

29.2% of GameStop shares are held by institutional investors. Comparatively, 91.7% of PENN Entertainment shares are held by institutional investors. 8.6% of GameStop shares are held by insiders. Comparatively, 2.7% of PENN Entertainment shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for GameStop and PENN Entertainment, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
GameStop	1	1	0	0	1.50
PENN Entertainment	2	6	9	0	2.41

GameStop presently has a consensus price target of $13.50, suggesting a potential downside of 43.53%. PENN Entertainment has a consensus price target of $19.67, suggesting a potential upside of 47.54%. Given PENN Entertainment’s stronger consensus rating and higher possible upside, analysts plainly believe PENN Entertainment is more favorable than GameStop.

Risk & Volatility

GameStop has a beta of 2.02, meaning that its share price is 102% more volatile than the S&P 500. Comparatively, PENN Entertainment has a beta of 1.39, meaning that its share price is 39% more volatile than the S&P 500.

Profitability

This table compares GameStop and PENN Entertainment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
GameStop	11.08%	9.75%	5.80%
PENN Entertainment	-13.24%	-4.59%	-0.83%

Valuation & Earnings

This table compares GameStop and PENN Entertainment”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
GameStop	$3.82 billion	2.80	$131.30 million	$0.82	29.15
PENN Entertainment	$6.58 billion	0.27	-$311.50 million	($6.35)	-2.10

GameStop has higher earnings, but lower revenue than PENN Entertainment. PENN Entertainment is trading at a lower price-to-earnings ratio than GameStop, indicating that it is currently the more affordable of the two stocks.

Summary

GameStop beats PENN Entertainment on 9 of the 14 factors compared between the two stocks.

About GameStop

GameStop Corp., a specialty retailer, provides games and entertainment products through its stores and ecommerce platforms in the United States, Canada, Australia, and Europe. The company sells new and pre-owned gaming platforms; accessories, such as controllers, gaming headsets, and virtual reality products; new and pre-owned gaming software; and in-game digital currency, digital downloadable content, and full-game downloads. It sells collectibles comprising apparel, toys, trading cards, gadgets, and other retail products for pop culture and technology enthusiasts, as well as engages in the digital asset wallet and NFT marketplace activities. The company operates stores and ecommerce sites under the GameStop, EB Games, and Micromania brands; and pop culture themed stores that sell collectibles, apparel, gadgets, electronics, toys, and other retail products under the Zing Pop Culture brand, as well as offers Game Informer magazine, a print and digital gaming publication. The company was formerly known as GSC Holdings Corp. GameStop Corp. was founded in 1996 and is headquartered in Grapevine, Texas.

About PENN Entertainment

PENN Entertainment, Inc., together with its subsidiaries, provides integrated entertainment, sports content, and casino gaming experiences. The company operates through five segments: Northeast, South, West, Midwest, and Interactive. It operates online sports betting in various jurisdictions; and iCasino under Hollywood Casino, L'Auberge, ESPN BET, and theScore Bet Sportsbook and Casino brands. The company's portfolio also includes PENN Play, customer loyalty program, which offers a set of rewards and experiences for business channels. In addition, it owns various trademarks and service marks, including Ameristar, Argosy, Boomtown, Hollywood Casino, Hollywood Gaming, L'Auberge, PENN Play, theScore, theScore Bet, theScore esports, and M Resort. The company was formerly known as Penn National Gaming, Inc. and changed its name to PENN Entertainment, Inc. in August 2022. PENN Entertainment, Inc. was founded in 1972 and is based in Wyomissing, Pennsylvania.