Critical Review: Warner Music Group (NASDAQ:WMG) & Madison Square Garden (NYSE:MSGS)

Madison Square Garden (NYSE:MSGS) and Warner Music Group (NASDAQ:WMG) are both communication services companies, but which is the superior business? We will compare the two companies based on the strength of their valuation, dividends, institutional ownership, analyst recommendations, risk, profitability and earnings.

Volatility and Risk

Madison Square Garden has a beta of 0.62, indicating that its share price is 38% less volatile than the S&P 500. Comparatively, Warner Music Group has a beta of 1.3, indicating that its share price is 30% more volatile than the S&P 500.

Valuation and Earnings

This table compares Madison Square Garden and Warner Music Group”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Madison Square Garden	$1.15 billion	8.14	$7.76 million	$0.30	1,300.40
Warner Music Group	$6.71 billion	2.19	$365.00 million	$1.26	22.25

Warner Music Group has higher revenue and earnings than Madison Square Garden. Warner Music Group is trading at a lower price-to-earnings ratio than Madison Square Garden, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

68.9% of Madison Square Garden shares are owned by institutional investors. Comparatively, 96.9% of Warner Music Group shares are owned by institutional investors. 19.1% of Madison Square Garden shares are owned by insiders. Comparatively, 0.1% of Warner Music Group shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings and price targets for Madison Square Garden and Warner Music Group, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Madison Square Garden	0	5	4	0	2.44
Warner Music Group	0	4	13	0	2.76

Madison Square Garden currently has a consensus target price of $471.20, indicating a potential upside of 20.78%. Warner Music Group has a consensus target price of $38.77, indicating a potential upside of 38.31%. Given Warner Music Group’s stronger consensus rating and higher possible upside, analysts plainly believe Warner Music Group is more favorable than Madison Square Garden.

Profitability

This table compares Madison Square Garden and Warner Music Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Madison Square Garden	0.67%	-3.47%	0.64%
Warner Music Group	9.20%	85.50%	7.00%

Summary

Warner Music Group beats Madison Square Garden on 11 of the 14 factors compared between the two stocks.

About Madison Square Garden

Madison Square Garden Sports Corp. operates as a professional sports company in the United States. The company owns and operates a portfolio of assets that consists of the New York Knickerbockers of the National Basketball Association (NBA) and the New York Rangers of the National Hockey League. Its other professional franchises include development league teams, the Hartford Wolf Pack of the American Hockey League and the Westchester Knicks of the NBA G League. The company also owns Knicks Gaming, an esports franchise that competes in the NBA 2K League. In addition, it operates professional sports team performance centers, the Madison Square Garden Training Center in Greenburgh. The company was formerly known as The Madison Square Garden Company. Madison Square Garden Sports Corp. was incorporated in 2015 and is based in New York, New York.

About Warner Music Group

Warner Music Group Corp. operates as a music entertainment company in the United States, the United Kingdom, Germany, and internationally. It operates through Recorded Music and Music Publishing segments. The Recorded Music segment is involved in the discovery and development of recording artists, as well as related marketing, promotion, distribution, sale, and licensing of music created by such recording artists; markets its music catalog through compilations and reissuances of previously released music and video titles, as well as previously unreleased materials; and conducts its operation primarily through a collection of record labels, such as Warner Records and Atlantic Records, as well as Asylum, Big Beat, Canvasback, East West, Erato, FFRR, Fueled by Ramen, Nonesuch, Parlophone, Reprise, Roadrunner, Sire, Spinnin’ Records, Warner Classics, and Warner Music Nashville. This segment markets, distributes, and sells music and video products to retailers and wholesale distributors; independent labels to retail and wholesale distributors; and various distribution centers and ventures, as well as retail outlets, online physical retailers, streaming services, and download services. The Music Publishing segment owns and acquires rights to approximately one million musical compositions comprising pop hits, American standards, folk songs, and motion picture and theatrical compositions. Its catalog includes approximately 150,000 songwriters and composers; and various genres, including pop, rock, jazz, classical, country, R&B, hip-hop, rap, reggae, Latin, folk, blues, symphonic, soul, Broadway, electronic, alternative, and gospel. This segment also administers the music and soundtracks of various third-party television and film producers and studios. The company was founded in 1929 and is headquartered in New York, New York.