Red Rock Resorts (RRR) & Sunstone Hotel Investors (SHO) Financial Analysis

Red Rock Resorts (NASDAQ: RRR) and Sunstone Hotel Investors (NYSE:SHO) are both mid-cap consumer discretionary companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, risk, valuation, institutional ownership, earnings, analyst recommendations and profitability.

Profitability

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This table compares Red Rock Resorts and Sunstone Hotel Investors’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Red Rock Resorts 2.18% 16.11% 2.72%
Sunstone Hotel Investors 12.53% 5.56% 3.56%

Institutional & Insider Ownership

63.2% of Red Rock Resorts shares are owned by institutional investors. 40.9% of Red Rock Resorts shares are owned by company insiders. Comparatively, 0.9% of Sunstone Hotel Investors shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Red Rock Resorts and Sunstone Hotel Investors, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Red Rock Resorts 0 4 4 0 2.50
Sunstone Hotel Investors 2 6 2 0 2.00

Red Rock Resorts presently has a consensus target price of $31.86, indicating a potential upside of 11.23%. Sunstone Hotel Investors has a consensus target price of $15.93, indicating a potential upside of 9.47%. Given Red Rock Resorts’ stronger consensus rating and higher probable upside, equities analysts clearly believe Red Rock Resorts is more favorable than Sunstone Hotel Investors.

Volatility & Risk

Red Rock Resorts has a beta of 1.56, meaning that its stock price is 56% more volatile than the S&P 500. Comparatively, Sunstone Hotel Investors has a beta of 1.06, meaning that its stock price is 6% more volatile than the S&P 500.

Dividends

Red Rock Resorts pays an annual dividend of $0.40 per share and has a dividend yield of 1.4%. Sunstone Hotel Investors pays an annual dividend of $0.20 per share and has a dividend yield of 1.4%. Red Rock Resorts pays out 64.5% of its earnings in the form of a dividend. Sunstone Hotel Investors pays out 16.4% 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 Sunstone Hotel Investors’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Red Rock Resorts $1.62 billion 2.06 $35.15 million $0.62 46.19
Sunstone Hotel Investors $1.19 billion 2.75 $145.37 million $1.22 11.93

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

Summary

Red Rock Resorts beats Sunstone Hotel Investors on 10 of the 16 factors compared between the two stocks.

Red Rock Resorts Company Profile

Red Rock Resorts, Inc., through its interest in Station Holdco and Station LLC, engages in casino entertainment, and gaming and entertainment businesses in the United States. It operates through two segments, Las Vegas operations and Native American management. The company develops, manages, and operates casino entertainment properties; and owns and operates 10 gaming and entertainment facilities, and 10 smaller casinos in the Las Vegas regional market. In addition, it manages Graton Resort in Sonoma County, California; and Gun Lake in Allegan County, Michigan. It operates 19,219 slot machines; 319 table games; and 4,316 hotel rooms. 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. is based in Las Vegas, Nevada.

Sunstone Hotel Investors Company Profile

Sunstone Hotel Investors, Inc. is a lodging real estate investment trust ("REIT") that as of February 12, 2018 has interests in 25 hotels comprised of 12,450 rooms. Sunstone's hotels are primarily in the urban and resort upper upscale segment and are predominantly operated under nationally recognized brands, such as Marriott, Hilton and Hyatt. For further information, please visit Sunstone's website at www.sunstonehotels.com.

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