Waddell & Reed Financial (NYSE: WDR) and Safeguard Scientifics (NYSE:SFE) are both small-cap financials companies, but which is the better investment? We will contrast the two businesses based on the strength of their analyst recommendations, dividends, earnings, profitability, institutional ownership, valuation and risk.
Risk & Volatility
Waddell & Reed Financial has a beta of 2.1, suggesting that its stock price is 110% more volatile than the S&P 500. Comparatively, Safeguard Scientifics has a beta of 1.3, suggesting that its stock price is 30% more volatile than the S&P 500.
This is a summary of recent ratings and recommmendations for Waddell & Reed Financial and Safeguard Scientifics, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Waddell & Reed Financial||5||2||0||0||1.29|
Waddell & Reed Financial presently has a consensus target price of $19.14, suggesting a potential downside of 17.06%. Safeguard Scientifics has a consensus target price of $13.25, suggesting a potential upside of 18.83%. Given Safeguard Scientifics’ higher probable upside, analysts clearly believe Safeguard Scientifics is more favorable than Waddell & Reed Financial.
Insider and Institutional Ownership
97.4% of Waddell & Reed Financial shares are held by institutional investors. Comparatively, 76.3% of Safeguard Scientifics shares are held by institutional investors. 3.8% of Waddell & Reed Financial shares are held by insiders. Comparatively, 2.7% of Safeguard Scientifics shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.
This table compares Waddell & Reed Financial and Safeguard Scientifics’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Waddell & Reed Financial||10.10%||16.81%||10.22%|
Valuation and Earnings
This table compares Waddell & Reed Financial and Safeguard Scientifics’ gross revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Waddell & Reed Financial||$1.24 billion||1.55||$146.90 million||$1.40||16.49|
|Safeguard Scientifics||N/A||N/A||-$22.26 million||($4.49)||-2.48|
Waddell & Reed Financial has higher revenue and earnings than Safeguard Scientifics. Safeguard Scientifics is trading at a lower price-to-earnings ratio than Waddell & Reed Financial, indicating that it is currently the more affordable of the two stocks.
Waddell & Reed Financial pays an annual dividend of $1.00 per share and has a dividend yield of 4.3%. Safeguard Scientifics does not pay a dividend. Waddell & Reed Financial pays out 71.4% of its earnings in the form of a dividend.
Waddell & Reed Financial beats Safeguard Scientifics on 10 of the 12 factors compared between the two stocks.
Waddell & Reed Financial Company Profile
Waddell & Reed Financial, Inc., incorporated on December 24, 1981, is a holding company. The Company is a mutual fund and asset management company. The Company provides investment management, investment advisory, investment product underwriting, and distribution and shareholder services administration to Waddell & Reed Advisors group of mutual funds (the Advisors Funds), Ivy Funds, Ivy Funds Variable Insurance Portfolios (Ivy Funds VIP), InvestEd Portfolios and 529 college savings plan (collectively, the Funds), and the Ivy Global Investors Fund SICAV (the SICAV) and its Ivy Global Investors sub-funds (the IGI Funds), and institutional and separately managed accounts. The Company operates its business through a distribution network. Its retail products are distributed through third parties, such as other broker-dealers, registered investment advisors and various retirement platforms or through associated independent contractor financial advisors.
Safeguard Scientifics Company Profile
Safeguard Scientifics, Inc. is engaged in providing capital to technology companies within the fields of healthcare, financial services and digital media. The Company holds interest in companies, which it refers to as partner companies. As of December 31, 2016, the Company held interests in 29 non-consolidated partner companies. The Company offers operational and management support to each of its partner companies. In addition to management and operational support, the Company offers ongoing planning and development assessment. It provides mentoring, advice and guidance to develop partner company management. The Company serves on the boards of directors of its partner companies, working with them to develop and implement strategic and operating plans. It measures and monitors achievement of these plans through regular review of operational and financial performance measurements.
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