Analyzing Red Rock Resorts (NASDAQ:RRR) and Electronic Arts (NASDAQ:EA)

Red Rock Resorts (NASDAQ:RRR) and Electronic Arts (NASDAQ:EA) are both consumer discretionary companies, but which is the superior stock? We will compare the two companies based on the strength of their dividends, risk, profitability, institutional ownership, earnings, analyst recommendations and valuation.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Red Rock Resorts and Electronic Arts, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Red Rock Resorts	1	3	12	0	2.69
Electronic Arts	1	16	3	0	2.10

Red Rock Resorts presently has a consensus price target of $67.67, suggesting a potential upside of 32.58%. Electronic Arts has a consensus price target of $196.64, suggesting a potential downside of 1.77%. Given Red Rock Resorts’ stronger consensus rating and higher possible upside, analysts clearly believe Red Rock Resorts is more favorable than Electronic Arts.

Profitability

This table compares Red Rock Resorts and Electronic Arts’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Red Rock Resorts	9.21%	61.67%	4.51%
Electronic Arts	11.78%	23.41%	11.71%

Dividends

Red Rock Resorts pays an annual dividend of $1.04 per share and has a dividend yield of 2.0%. Electronic Arts pays an annual dividend of $0.76 per share and has a dividend yield of 0.4%. Red Rock Resorts pays out 33.4% of its earnings in the form of a dividend. Electronic Arts pays out 21.8% 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.

Valuation and Earnings

This table compares Red Rock Resorts and Electronic Arts”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Red Rock Resorts	$2.02 billion	2.65	$188.07 million	$3.11	16.41
Electronic Arts	$7.53 billion	6.65	$887.00 million	$3.49	57.36

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

Institutional & Insider Ownership

47.8% of Red Rock Resorts shares are owned by institutional investors. Comparatively, 90.2% of Electronic Arts shares are owned by institutional investors. 53.8% of Red Rock Resorts shares are owned by insiders. Comparatively, 0.2% of Electronic Arts shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Risk and Volatility

Red Rock Resorts has a beta of 1.35, suggesting that its stock price is 35% more volatile than the S&P 500. Comparatively, Electronic Arts has a beta of 0.66, suggesting that its stock price is 34% less volatile than the S&P 500.

Summary

Electronic Arts beats Red Rock Resorts on 9 of the 16 factors compared between the two stocks.

About Red Rock Resorts

Red Rock Resorts, Inc., through its interest in Station Casinos LLC, develops and operates casino and entertainment properties in the United States. The company owns and operates gaming and entertainment facilities, including Durango Casino & Resort and smaller casinos in the Las Vegas regional market. The company was formerly known as Station Casinos Corp. and changed its name to Red Rock Resorts, Inc. in January 2016. Red Rock Resorts, Inc. was founded in 1976 and is based in Las Vegas, Nevada.

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.