Zynga Inc. (NASDAQ:ZNGA) shares are up more than 2.00% this year and recently increased 0.49% or $0.02 to settle at $4.08. Host Hotels & Resorts, Inc. (NYSE:HST), on the other hand, is up 2.32% year to date as of 05/17/2018. It currently trades at $20.31 and has returned -2.92% during the past week.

Zynga Inc. (NASDAQ:ZNGA) and Host Hotels & Resorts, Inc. (NYSE:HST) are the two most active stocks in the Multimedia & Graphics Software 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 ZNGA to grow earnings at a 30.00% annual rate over the next 5 years. Comparatively, HST is expected to grow at a 28.40% annual rate. All else equal, ZNGA’s higher growth rate would imply a greater potential for capital appreciation.

**Profitability and Returns**

A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this., compared to an EBITDA margin of 31.2% for Host Hotels & Resorts, Inc. (HST). ZNGA’s ROI is 1.20% while HST has a ROI of 5.50%. The interpretation is that HST’s business generates a higher return on investment than ZNGA’s.

**Cash Flow**

The amount of free cash flow available to investors is ultimately what determines the value of a stock. ZNGA’s free cash flow (“FCF”) per share for the trailing twelve months was -0.01. Comparatively, HST’s free cash flow per share was -0.07. On a percent-of-sales basis, ZNGA’s free cash flow was -0% while HST converted -0.96% of its revenues into cash flow. This means that, for a given level of sales, ZNGA is able to generate more free cash flow for investors.

**Liquidity and Financial Risk**

ZNGA’s debt-to-equity ratio is 0.00 versus a D/E of 0.60 for HST. HST is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

ZNGA trades at a forward P/E of 24.00, a P/B of 2.16, and a P/S of 3.54, compared to a forward P/E of 27.98, a P/B of 2.12, and a P/S of 2.78 for HST. ZNGA is the cheaper of the two stocks on an earnings basis but is expensive in terms of P/B and P/S ratio. 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

Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. ZNGA is currently priced at a -7.27% to its one-year price target of 4.40. Comparatively, HST is -1.74% relative to its price target of 20.67. This suggests that ZNGA is the better investment over the next year.

Risk and Volatility

Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. ZNGA has a beta of 0.53 and HST’s beta is 1.31. ZNGA’s shares are therefore the less volatile of the two stocks.

**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. ZNGA has a short ratio of 2.22 compared to a short interest of 4.75 for HST. This implies that the market is currently less bearish on the outlook for ZNGA.

**Summary**

Zynga Inc. (NASDAQ:ZNGA) beats Host Hotels & Resorts, Inc. (NYSE:HST) on a total of 10 of the 14 factors compared between the two stocks. ZNGA is growing fastly, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. ZNGA is more undervalued relative to its price target. Finally, ZNGA has better sentiment signals based on short interest.