Multimedia Games (NASDAQ: MGAM) and Scientific Games (NASDAQ:SGMS) are both cyclical consumer goods & services companies, but which is the superior investment? We will contrast the two businesses based on the strength of their profitability, valuation, dividends, earnings, risk, analyst recommendations and institutional ownership.

Insider & Institutional Ownership

64.0% of Scientific Games shares are held by institutional investors. 40.6% of Scientific Games shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares Multimedia Games and Scientific Games’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Multimedia Games N/A N/A N/A $1.03 35.38
Scientific Games $2.88 billion 1.65 -$353.70 million ($3.50) -15.19

Multimedia Games has higher earnings, but lower revenue than Scientific Games. Scientific Games is trading at a lower price-to-earnings ratio than Multimedia Games, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Multimedia Games has a beta of 1.49, indicating that its stock price is 49% more volatile than the S&P 500. Comparatively, Scientific Games has a beta of 2.64, indicating that its stock price is 164% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Multimedia Games and Scientific Games, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Multimedia Games 0 0 0 0 N/A
Scientific Games 0 3 2 0 2.40

Scientific Games has a consensus target price of $42.50, suggesting a potential downside of 20.04%. Given Scientific Games’ higher probable upside, analysts clearly believe Scientific Games is more favorable than Multimedia Games.

Profitability

This table compares Multimedia Games and Scientific Games’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Multimedia Games N/A N/A N/A
Scientific Games -10.29% N/A -3.47%

Summary

Scientific Games beats Multimedia Games on 6 of the 9 factors compared between the two stocks.

Multimedia Games Company Profile

Multimedia Games Holding Company, Inc. (Multimedia Games), incorporated on August 30, 1991, is engaged in designing, manufacturing and supplying gaming machines and systems to commercial and Native American casino operators in North America, as well as, domestic and selected international lottery operators, and commercial bingo gaming facility operators. The Company’s revenues are generated from the operation of gaming machines in revenue-sharing arrangements and from the sale of gaming machines and systems that features licensed game themes. Multimedia Games places its revenue-sharing machines and sells its gaming machines and systems in Class II, Class III, video lottery terminal (VLT) and electronic bingo settings. The Company has added eTables to its product portfolio with the acquisition of PokerTek, Inc. Additionally, it offers cash access and compliance solutions.

Scientific Games Company Profile

Scientific Games Corporation is a developer of technology-based products and services and associated content for the gaming, lottery and interactive gaming industries. Its segments include Gaming, Lottery and Interactive. Its portfolio includes gaming machines and game content, casino management systems, table game products and services, instant and draw-based lottery games, server-based gaming and lottery systems, sports betting technology, lottery content and services, loyalty and rewards programs, interactive gaming and social casino solutions. Gaming segment designs, develops, manufactures, markets and distributes a portfolio of gaming products and services. Lottery segment consists of its systems-based services and product sales business and its instant games business. Its Interactive business segment includes social (non-wagering) gaming and interactive real-money gaming (RMG). Its games are available on Facebook, Amazon.com, the Apple app store and Android app on Google play.

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