Reviewing Sohu.com (NASDAQ:SOHU) and Changyou.com Limited (CYOU)

Sohu.com (NASDAQ: SOHU) and Changyou.com Limited (NASDAQ:CYOU) are both mid-cap computer and technology companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, earnings, valuation, institutional ownership, risk and dividends.

Institutional & Insider Ownership

63.2% of Sohu.com shares are held by institutional investors. Comparatively, 26.1% of Changyou.com Limited shares are held by institutional investors. 21.0% of Sohu.com shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares Sohu.com and Changyou.com Limited’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Sohu.com $1.66 billion 1.28 $84.89 million ($7.70) -7.09
Changyou.com Limited $536.62 million 4.01 $170.75 million $3.02 13.54

Changyou.com Limited has higher revenue, but lower earnings than Sohu.com. Sohu.com is trading at a lower price-to-earnings ratio than Changyou.com Limited, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current recommendations and price targets for Sohu.com and Changyou.com Limited, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sohu.com 1 4 1 0 2.00
Changyou.com Limited 1 6 1 0 2.00

Sohu.com presently has a consensus target price of $52.58, suggesting a potential downside of 3.74%. Changyou.com Limited has a consensus target price of $33.67, suggesting a potential downside of 17.69%. Given Sohu.com’s higher probable upside, analysts clearly believe Sohu.com is more favorable than Changyou.com Limited.

Profitability

This table compares Sohu.com and Changyou.com Limited’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sohu.com -17.93% -19.12% -11.55%
Changyou.com Limited 30.03% 13.57% 9.19%

Volatility and Risk

Sohu.com has a beta of 1.4, suggesting that its share price is 40% more volatile than the S&P 500. Comparatively, Changyou.com Limited has a beta of 1.26, suggesting that its share price is 26% more volatile than the S&P 500.

Summary

Changyou.com Limited beats Sohu.com on 6 of the 11 factors compared between the two stocks.

About Sohu.com

Sohu.com Inc. (Sohu) is an online media, search and game service company, which is engaged in providing online products and services on personal computers (PCs) and mobile devices in the People’s Republic of China (the PRC). The Company operates through three segments: the Sohu segment; the Sogou segment, and the Changyou segment. The Sohu segment’s business is the brand advertising business, which offers to users, over its matrices of Chinese language online media, various content, products and services across multiple Internet-enabled devices, such as PCs, mobile phones and tablets. The search and search-related business primarily offers advertisers pay-for-click services, as well as online marketing services on Web directories operated by Sogou. Changyou’s business lines consist of the online game business; the platform channel business, which consists primarily of online advertising and also includes Internet value-added services (IVAS), and the cinema advertising business.

About Changyou.com Limited

Changyou.com Limited is an online game developer and operator. The Company is engaged in the development, operation and licensing of online games for personal computers (PCs) and mobile devices. The Company’s segments include Online Game segment, which consists primarily of PC games and mobile games; the Platform Channel segment, which consists primarily of online advertising services offered on the 17173.com Website, Internet value-added services (IVAS) offered on the Dolphin Browser and RaidCall and online card and board games offered by MoboTap, and the Cinema Advertising segment, which consists primarily of the acquisition, from operators of movie theaters, and the sale, to advertisers, of pre-film advertising slots, which are advertisements shown before the screening of a movie in a cinema theater. Its online games include a range of genres, including massively multi-player online role-playing games (MMORPGs), third person shooter games (TPSs) and collectible card games (CCGs).

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