CEC Entertainment (CEC) & McDonald's (MCD) Critical Contrast

CEC Entertainment (NYSE: CEC) and McDonald's (NYSE:MCD) are both cyclical consumer goods & services companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, valuation, analyst recommendations, risk, institutional ownership, profitability and earnings.

Valuation & Earnings

This table compares CEC Entertainment and McDonald's’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
CEC Entertainment N/A N/A N/A $2.73 N/A
McDonald's $24.62 billion 5.62 $4.69 billion $6.93 25.05

McDonald's has higher revenue and earnings than CEC Entertainment. CEC Entertainment is trading at a lower price-to-earnings ratio than McDonald's, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

67.3% of McDonald's shares are owned by institutional investors. 0.2% of McDonald's shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares CEC Entertainment and McDonald's’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
CEC Entertainment N/A N/A N/A
McDonald's 24.19% -216.45% 16.36%

Risk & Volatility

CEC Entertainment has a beta of 0.61, indicating that its stock price is 39% less volatile than the S&P 500. Comparatively, McDonald's has a beta of 0.67, indicating that its stock price is 33% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for CEC Entertainment and McDonald's, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CEC Entertainment 0 0 0 0 N/A
McDonald's 0 6 24 0 2.80

McDonald's has a consensus target price of $179.37, suggesting a potential upside of 3.31%.

Dividends

McDonald's pays an annual dividend of $4.04 per share and has a dividend yield of 2.3%. CEC Entertainment does not pay a dividend. McDonald's pays out 58.3% of its earnings in the form of a dividend. CEC Entertainment has raised its dividend for 41 consecutive years.

Summary

McDonald's beats CEC Entertainment on 9 of the 12 factors compared between the two stocks.

CEC Entertainment Company Profile

CEC Entertainment, Inc. is engaged in the family dining and entertainment center business. The Company develops, operates and franchises family dining and entertainment centers under the name Chuck E. Cheese’s. Chuck E. Cheese’s stores feature musical and comic entertainment by robotic and animated characters, arcade-style and skill-oriented games, video games, rides and other activities. All of its stores offer dining selections consisting of a range of beverages, pizzas, sandwiches, appetizers, a salad bar and desserts. As of January 1, 2012, the Company and its franchisees operated a total of 556 Chuck E. Cheese’s stores. As of January 1, 2012, it operated 507 Company-owned Chuck E. Cheese’s stores located in 44 states and Canada and its franchisees operated a total of 49 stores located in 15 states, Puerto Rico, Guam, Guatemala, Chile, Saudi Arabia and the United Arab Emirates. In February 2014, Apollo Global Management, LLC completed the acquisition of CEC Entertainment Inc.

McDonald's Company Profile

McDonald’s Corporation (McDonald’s) operates and franchises McDonald’s restaurants. The Company’s restaurants serve a locally relevant menu of food and drinks sold at various price points in over 100 countries. The Company’s segments include U.S., International Lead Markets, High Growth Markets, and Foundational Markets and Corporate. The U.S. segment focuses on offering a platform for authentic ingredients that allows customers to customize their sandwiches. Its High Growth Markets segment includes its operations in markets, such as China, Italy, Korea, Poland, Russia, Spain, Switzerland, the Netherlands and related markets. The International Lead markets segment includes the Company’s operations in various markets, such as Australia, Canada, France, Germany, the United Kingdom and related markets. The Foundational markets and Corporate segment is engaged in operating restaurants and increasing convenience to customers, including through drive-thru and delivery.

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