BlackRock (NYSE: BLK) and Waddell & Reed Financial (NYSE:WDR) are both finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their risk, valuation, analyst recommendations, profitability, earnings, dividends and institutional ownership.

Insider and Institutional Ownership

82.8% of BlackRock shares are held by institutional investors. Comparatively, 96.4% of Waddell & Reed Financial shares are held by institutional investors. 1.9% of BlackRock shares are held by company insiders. Comparatively, 3.8% of Waddell & Reed Financial shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Risk and Volatility

BlackRock has a beta of 1.71, meaning that its stock price is 71% more volatile than the S&P 500. Comparatively, Waddell & Reed Financial has a beta of 2.04, meaning that its stock price is 104% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings for BlackRock and Waddell & Reed Financial, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
BlackRock 0 5 7 0 2.58
Waddell & Reed Financial 5 2 0 0 1.29

BlackRock currently has a consensus target price of $440.82, suggesting a potential upside of 6.39%. Waddell & Reed Financial has a consensus target price of $17.50, suggesting a potential downside of 4.58%. Given BlackRock’s stronger consensus rating and higher possible upside, equities research analysts clearly believe BlackRock is more favorable than Waddell & Reed Financial.

Valuation and Earnings

This table compares BlackRock and Waddell & Reed Financial’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
BlackRock $11.52 billion 5.83 $5.06 billion $20.84 19.88
Waddell & Reed Financial $1.17 billion 1.31 $241.86 million $1.59 11.53

BlackRock has higher revenue and earnings than Waddell & Reed Financial. Waddell & Reed Financial is trading at a lower price-to-earnings ratio than BlackRock, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares BlackRock and Waddell & Reed Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
BlackRock 29.92% 11.74% 1.53%
Waddell & Reed Financial 11.34% 18.75% 11.31%

Dividends

BlackRock pays an annual dividend of $10.00 per share and has a dividend yield of 2.4%. Waddell & Reed Financial pays an annual dividend of $1.84 per share and has a dividend yield of 10.0%. BlackRock pays out 48.0% of its earnings in the form of a dividend. Waddell & Reed Financial pays out 115.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. BlackRock has increased its dividend for 7 consecutive years and Waddell & Reed Financial has increased its dividend for 6 consecutive years.

Summary

BlackRock beats Waddell & Reed Financial on 11 of the 17 factors compared between the two stocks.

BlackRock Company Profile

BlackRock, Inc. (BlackRock) is an investment management company. BlackRock provides a range of investment and risk management services to institutional and retail clients worldwide. Its diverse platform of active (alpha) and index (beta) investment strategies across asset classes enables the Company to tailor investment outcomes and asset allocation solutions for clients. Its product offerings include single- and multi-asset portfolios investing in equities, fixed income, alternatives and money market instruments. Its products are offered directly and through intermediaries in a range of vehicles, including open-end and closed-end mutual funds, iShares exchange-traded funds (ETFs), separate accounts, collective investment funds and other pooled investment vehicles. It offers its Aladdin investment system, as well as risk management, outsourcing, advisory and technology services, to institutional investors and wealth management intermediaries under the BlackRock Solutions name.

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.

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