Federated Investors (NYSE: FII) and T. Rowe Price Group (NASDAQ:TROW) are both mid-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their risk, earnings, profitability, analyst recommendations, institutional ownership, valuation and dividends.
Federated Investors pays an annual dividend of $1.00 per share and has a dividend yield of 3.3%. T. Rowe Price Group pays an annual dividend of $2.28 per share and has a dividend yield of 2.5%. Federated Investors pays out 48.1% of its earnings in the form of a dividend. T. Rowe Price Group pays out 39.2% 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. Federated Investors has increased its dividend for 30 consecutive years. Federated Investors is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
This table compares Federated Investors and T. Rowe Price Group’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|T. Rowe Price Group||32.64%||24.38%||18.94%|
Institutional & Insider Ownership
82.9% of Federated Investors shares are held by institutional investors. Comparatively, 73.6% of T. Rowe Price Group shares are held by institutional investors. 7.1% of Federated Investors shares are held by insiders. Comparatively, 3.6% of T. Rowe Price Group 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.
Valuation and Earnings
This table compares Federated Investors and T. Rowe Price Group’s gross revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Federated Investors||$1.13 billion||2.76||$345.66 million||$2.08||14.75|
|T. Rowe Price Group||$4.47 billion||4.95||$2.06 billion||$5.82||15.80|
T. Rowe Price Group has higher revenue and earnings than Federated Investors. Federated Investors is trading at a lower price-to-earnings ratio than T. Rowe Price Group, indicating that it is currently the more affordable of the two stocks.
Risk and Volatility
Federated Investors has a beta of 1.45, meaning that its stock price is 45% more volatile than the S&P 500. Comparatively, T. Rowe Price Group has a beta of 1.25, meaning that its stock price is 25% more volatile than the S&P 500.
This is a summary of recent ratings and price targets for Federated Investors and T. Rowe Price Group, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|T. Rowe Price Group||2||6||2||0||2.00|
Federated Investors presently has a consensus target price of $23.50, suggesting a potential downside of 23.43%. T. Rowe Price Group has a consensus target price of $86.56, suggesting a potential downside of 5.90%. Given T. Rowe Price Group’s stronger consensus rating and higher possible upside, analysts clearly believe T. Rowe Price Group is more favorable than Federated Investors.
T. Rowe Price Group beats Federated Investors on 11 of the 17 factors compared between the two stocks.
Federated Investors Company Profile
Federated Investors, Inc. (Federated) is a provider of investment management products and related financial services. Federated operates through investment management business segment. It is engaged in sponsoring, marketing and providing investment-related services to various investment products, including mutual funds and Separate Accounts, which include separately managed accounts, institutional accounts, sub-advised funds and other managed products. It operates in one segment, the investment management business. As of December 31, 2016, Federated provided investment advisory services to 124 sponsored investment companies and other funds (Federated Funds). It markets these funds to banks, brokers and dealers and other financial intermediaries using them to meet the needs of their customers and clients, including retail investors, corporations and retirement plans. The Company offers a range of products and strategies, including money market, equity and fixed-income investments.
T. Rowe Price Group Company Profile
T. Rowe Price Group, Inc. is a financial services holding company. The Company provides global investment management services through its subsidiaries to investors across the world. The Company provides an array of Company sponsored the United States mutual funds, other sponsored pooled investment vehicles, sub advisory services, separate account management, recordkeeping, and related services to individuals, advisors, institutions, financial intermediaries and retirement plan sponsors. The Company distributes its products in countries located within three geographical regions: North America, Europe Middle East and Africa (EMEA), and Asia Pacific (APAC). It also offers specialized advisory services, including management of stable value investment contracts and a distribution management service for the disposition of equity securities its clients receive from third-party venture capital investment pools. As of December 31, 2016, it serviced clients in 45 countries across the world.
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