Electronic Arts (NASDAQ: EA) and Marketo (NASDAQ:MKTO) are both consumer discretionary companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, earnings, valuation, risk, institutional ownership, dividends and analyst recommendations.

Profitability

This table compares Electronic Arts and Marketo’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Electronic Arts 23.31% 29.77% 15.74%
Marketo -23.20% -98.33% -27.18%

Analyst Recommendations

This is a summary of recent ratings for Electronic Arts and Marketo, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Electronic Arts 0 3 19 0 2.86
Marketo 0 0 0 0 N/A

Electronic Arts presently has a consensus target price of $114.97, suggesting a potential downside of 3.17%. Given Electronic Arts’ higher probable upside, equities analysts clearly believe Electronic Arts is more favorable than Marketo.

Insider and Institutional Ownership

93.9% of Electronic Arts shares are held by institutional investors. 2.6% of Electronic Arts shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Electronic Arts and Marketo’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Electronic Arts $5.02 billion 7.30 $1.58 billion $3.74 31.75
Marketo N/A N/A N/A ($1.71) -20.34

Electronic Arts has higher revenue and earnings than Marketo. Marketo is trading at a lower price-to-earnings ratio than Electronic Arts, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Electronic Arts has a beta of 0.72, meaning that its stock price is 28% less volatile than the S&P 500. Comparatively, Marketo has a beta of 1.1, meaning that its stock price is 10% more volatile than the S&P 500.

Summary

Electronic Arts beats Marketo on 9 of the 10 factors compared between the two stocks.

About Electronic Arts

Electronic Arts Inc. develops, markets, publishes and distributes games, content and services that can be played by consumers on a range of platforms, which include consoles, personal computers (PCs), mobile phones and tablets. The Company’s games and services are based on a portfolio of intellectual property that includes established brands, such as FIFA, Madden NFL, Star Wars, Battlefield, the Sims and Need for Speed. The Company markets and sells its games and services through retail channels and through digital distribution channels. The Company’s PC games and additional content can be downloaded directly through its Origin online platform, as well as through third-party online download stores. Its mobile, tablet and PC free-to-download games and additional content are available through third-party application storefronts, such as the Apple Application Store and Google Play.

About Marketo

Marketo, Inc. is a United States-based provider of a cloud-based Engagement Marketing software platform, which enables organizations to involve in engagement marketing. The Company’s platform offers a range applications across various categories, including Marketing Automation, which helps to organize personalized multi-channel marketing campaigns and workflows; Email Marketing, which provides the ability to tap the insights captured in the Audience Hub to send e-mail messages; Mobile Engagement, which engages customers on their mobile devices; Digital Ads, which allows marketers to focus on behavioral data captured in the Audience Hub for personalized digital advertisements; Web Personalization, which helps in personalizing experiences to engage people; Marketing Analytics; Predictive Content, which discovers Website assets, such as e-books and case studies; Marketing Calendar, and Sales Insight. It offers solutions, such as Lead Management solution and Consumer Marketing solution.

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