Federated Investors (NYSE: FII) and Pzena Investment Management (NYSE:PZN) are both finance companies, but which is the better business? We will compare the two companies based on the strength of their earnings, risk, institutional ownership, profitability, valuation, analyst recommendations and dividends.

Dividends

Federated Investors pays an annual dividend of $1.00 per share and has a dividend yield of 3.6%. Pzena Investment Management pays an annual dividend of $0.12 per share and has a dividend yield of 1.3%. Federated Investors pays out 48.1% of its earnings in the form of a dividend. Pzena Investment Management pays out 18.2% 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.

Institutional & Insider Ownership

82.9% of Federated Investors shares are held by institutional investors. Comparatively, 17.4% of Pzena Investment Management shares are held by institutional investors. 7.1% of Federated Investors shares are held by company insiders. Comparatively, 55.9% of Pzena Investment Management shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares Federated Investors and Pzena Investment Management’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Federated Investors $1.13 billion 2.42 $345.66 million $2.08 13.49
Pzena Investment Management $122.22 million 1.31 $56.40 million $0.66 13.98

Federated Investors has higher revenue and earnings than Pzena Investment Management. Federated Investors is trading at a lower price-to-earnings ratio than Pzena Investment Management, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings for Federated Investors and Pzena Investment Management, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Federated Investors 2 4 0 0 1.67
Pzena Investment Management 0 1 0 0 2.00

Federated Investors currently has a consensus target price of $23.50, indicating a potential downside of 16.22%. Given Federated Investors’ higher probable upside, analysts clearly believe Federated Investors is more favorable than Pzena Investment Management.

Profitability

This table compares Federated Investors and Pzena Investment Management’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Federated Investors 18.91% 33.93% 18.36%
Pzena Investment Management 14.82% 12.93% 6.38%

Volatility & Risk

Federated Investors has a beta of 1.42, meaning that its share price is 42% more volatile than the S&P 500. Comparatively, Pzena Investment Management has a beta of 1.63, meaning that its share price is 63% more volatile than the S&P 500.

Summary

Federated Investors beats Pzena Investment Management on 10 of the 15 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.

Pzena Investment Management Company Profile

Pzena Investment Management, Inc. is a holding company. The Company is the sole managing member of Pzena Investment Management, LLC. Pzena Investment Management, LLC is an investment management company. The Company also serves as the general partner of Pzena Investment Management, LP. The Company offers institutional investment products to public and corporate pension funds, endowments, foundations and certain commingled vehicles geared toward institutional investors. The Company also offers access to certain of its global and non-United States strategies through private placement vehicles and collective investment trusts. Pzena Investment Management, LLC is its operating company. Pzena Investment Management, LLC consists of Class A and Class B membership units.

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