Churchill Downs (NASDAQ:CHDN) and Advanced Drainage Systems (NYSE:WMS) are both mid-cap consumer discretionary companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, dividends, institutional ownership, risk, valuation, analyst recommendations and earnings.
Institutional and Insider Ownership
73.0% of Churchill Downs shares are held by institutional investors. Comparatively, 84.1% of Advanced Drainage Systems shares are held by institutional investors. 4.3% of Churchill Downs shares are held by insiders. Comparatively, 20.7% of Advanced Drainage Systems shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.
Valuation and Earnings
This table compares Churchill Downs and Advanced Drainage Systems' revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| Churchill Downs | $1.33 billion | 6.38 | $137.50 million | $4.43 | 49.70 |
| Advanced Drainage Systems | $1.67 billion | 4.79 | $-193,170,000.00 | ($3.21) | -35.23 |
Churchill Downs has higher earnings, but lower revenue than Advanced Drainage Systems. Advanced Drainage Systems is trading at a lower price-to-earnings ratio than Churchill Downs, indicating that it is currently the more affordable of the two stocks.
Volatility and Risk
Churchill Downs has a beta of 1.37, indicating that its share price is 37% more volatile than the S&P 500. Comparatively, Advanced Drainage Systems has a beta of 1.43, indicating that its share price is 43% more volatile than the S&P 500.
Dividends
Churchill Downs pays an annual dividend of $0.62 per share and has a dividend yield of 0.3%. Advanced Drainage Systems pays an annual dividend of $0.36 per share and has a dividend yield of 0.3%. Churchill Downs pays out 14.0% of its earnings in the form of a dividend. Advanced Drainage Systems pays out -11.2% 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 increased its dividend for 1 consecutive years and Advanced Drainage Systems has increased its dividend for 1 consecutive years. Advanced Drainage Systems is clearly the better dividend stock, given its higher yield and lower payout ratio.
Profitability
This table compares Churchill Downs and Advanced Drainage Systems' net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| Churchill Downs | -8.99% | 11.09% | 1.49% |
| Advanced Drainage Systems | 5.71% | 19.10% | 4.33% |
Analyst Recommendations
This is a summary of recent recommendations and price targets for Churchill Downs and Advanced Drainage Systems, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| Churchill Downs | 0 | 1 | 4 | 0 | 2.80 |
| Advanced Drainage Systems | 0 | 2 | 3 | 0 | 2.60 |
Churchill Downs presently has a consensus price target of $200.80, indicating a potential downside of 8.79%. Advanced Drainage Systems has a consensus price target of $99.50, indicating a potential downside of 12.02%. Given Churchill Downs' stronger consensus rating and higher possible upside, research analysts plainly believe Churchill Downs is more favorable than Advanced Drainage Systems.
Summary
Advanced Drainage Systems beats Churchill Downs on 10 of the 16 factors compared between the two stocks.
