Marriott International, Inc. (NASDAQ:MAR) and Hilton Worldwide Holdings Inc. (NASDAQ:HLT) are both Services companies that recently hit new low. Naturally, this has caught the attention of the investment community. But which is the better investment? To answer this question, we will compare the two companies across various metrics including growth, profitability, risk, return, dividends, and valuation.
Marriott International, Inc. (NASDAQ:MAR) operates in the Lodging segment of the Services sector. The company has grown sales at a 6.70% annual rate over the past five years, putting it in the medium growth category. MAR has a net profit margin of 6.30% and is more profitable than the average company in the Lodging industry. In terms of efficiency, MAR has an asset turnover ratio of 0.94. This figure represents the amount of revenue a company generates per dollar of assets. MAR’s financial leverage ratio is 4.17, which indicates that the company’s asset base is primarily funded by debt. Company’s return on equity, which is really just the product of the company’s profit margin, asset turnover, and financial leverage ratios, is 28.40%, which is better than the Lodging industry average ROE.
Marriott International, Inc. (MAR) pays out an annual dividend of 1.32 per share. At the current valuation, this equates to a dividend yield of 1.04%. The company has a payout ratio of 33.80%. MAR’s current dividend therefore should be sustainable. Stock’s free cash flow yield, which represents the amount of cash available to investors before dividends, expressed as a percentage of the stock price, is 0.92. All else equal, companies with higher FCF yields are viewed as cheaper. Company trades at a P/E ratio of 34.69, and is less expensive than the average stock in the Lodging industry. The average investment recommendation for MAR, taken from a group of Wall Street Analysts, is 2.40, or a buy.
Over the past three months, Marriott International, Inc. insiders have been net buyers, dumping a net of -195,072 shares. This implies that insiders have been feeling relatively bearish about the outlook for MAR. Insider activity and sentiment signals are important to monitor because they can shed light on how “risky” a stock is perceived to be at it’s current valuation. Knowing this, it makes sense to look at beta, a measure of market risk. MAR has a beta of 1.34 and therefore an above average level of market volatility.
Hilton Worldwide Holdings Inc. (NYSE:HLT) operates in the Lodging segment of the Services sector. HLT has increased sales at a 5.80% CAGR over the past five years, and is considered a medium growth stock. The company has a net profit margin of 0.30% and is more profitable than the average Lodging player. HLT’s asset turnover ratio is 0.58 and the company has financial leverage of 8.82. HLT’s return on equity of 1.20% is worse than the Lodging industry average.
Hilton Worldwide Holdings Inc. (HLT) pays a dividend of 0.60, which translates to dividend yield of 0.77% based on the current price. Stock has a payout ratio of 611.60%. According to this ratio, HLT should be able to continue making payouts at these levels. The company trades at a free cash flow yield of 0.8 and has a P/E of 784.14. Compared to the average company in the 80.47 space, HLT is relatively expensive. The average analyst recommendation for HLT is 2.00, or a buy.
Hilton Worldwide Holdings Inc. insiders have sold a net of -47,908,403 shares during the past three months, which implies that the company’s top executives have been feeling bearish about the stock’s outlook. Finally, HLT’s beta of 1.31 indicates that the stock has an above average level of market risk.
Marriott International, Inc. (NASDAQ:MAR) scores higher than Hilton Worldwide Holdings Inc. (NYSE:HLT) on 11 of the 13 measures compared between the two companies. MAR has the better fundamentals, scoring higher on growth, profitability, efficiency, leverage and return metrics. MAR’s dividend is more attractive. MAR wins on valuation measures. MAR has better insider activity and sentiment signals.