Hilton Worldwide Holdings Inc. (NYSE:HLT) shares are up more than 3.59% this year and recently decreased -1.29% or -$1.08 to settle at $82.73. Laureate Education, Inc. (NASDAQ:LAUR), on the other hand, is up 12.83% year to date as of 06/13/2018. It currently trades at $15.30 and has returned -5.32% during the past week.
Hilton Worldwide Holdings Inc. (NYSE:HLT) and Laureate Education, Inc. (NASDAQ:LAUR) are the two most active stocks in the Lodging industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.Growth
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect HLT to grow earnings at a 25.00% annual rate over the next 5 years.Profitability and Returns
Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use EBITDA margin and Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return., compared to an EBITDA margin of 15.78% for Laureate Education, Inc. (LAUR). HLT’s ROI is 11.80% while LAUR has a ROI of 8.10%. The interpretation is that HLT’s business generates a higher return on investment than LAUR’s.Cash Flow
Cash is king when it comes to investing. HLT’s free cash flow (“FCF”) per share for the trailing twelve months was +0.58. Comparatively, LAUR’s free cash flow per share was -0.32. On a percent-of-sales basis, HLT’s free cash flow was 1.91% while LAUR converted -1.37% of its revenues into cash flow. This means that, for a given level of sales, HLT is able to generate more free cash flow for investors.Liquidity and Financial Risk
Balance sheet risk is one of the biggest factors to consider before investing. HLT has a current ratio of 0.80 compared to 0.90 for LAUR. This means that LAUR can more easily cover its most immediate liabilities over the next twelve months. HLT’s debt-to-equity ratio is 3.79 versus a D/E of 1.73 for LAUR. HLT is therefore the more solvent of the two companies, and has lower financial risk.Valuation
HLT trades at a forward P/E of 26.06, a P/B of 15.01, and a P/S of 2.76, compared to a forward P/E of 14.66, a P/B of 1.62, and a P/S of 0.68 for LAUR. HLT is the expensive of the two stocks on an earnings, book value and sales basis. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.
Analyst Price Targets and Opinions
A cheap stock isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. HLT is currently priced at a -10.34% to its one-year price target of 92.27. Comparatively, LAUR is -17.65% relative to its price target of 18.58. This suggests that LAUR is the better investment over the next year.
Insider Activity and Investor Sentiment
Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. HLT has a short ratio of 1.61 compared to a short interest of 5.07 for LAUR. This implies that the market is currently less bearish on the outlook for HLT.Summary
Laureate Education, Inc. (NASDAQ:LAUR) beats Hilton Worldwide Holdings Inc. (NYSE:HLT) on a total of 8 of the 14 factors compared between the two stocks. LAUR is growing fastly and has lower financial risk. In terms of valuation, LAUR is the cheaper of the two stocks on an earnings, book value and sales basis, LAUR is more undervalued relative to its price target. Finally, FRC has better sentiment signals based on short interest.