Fortress Investment Group (NYSE: FIG) and Franklin Resources (NYSE:BEN) are both mid-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, earnings, dividends, institutional ownership, analyst recommendations, risk and profitability.

Insider & Institutional Ownership

40.2% of Fortress Investment Group shares are owned by institutional investors. Comparatively, 45.0% of Franklin Resources shares are owned by institutional investors. 45.2% of Fortress Investment Group shares are owned by insiders. Comparatively, 21.6% of Franklin Resources shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of current ratings and target prices for Fortress Investment Group and Franklin Resources, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Fortress Investment Group 0 4 0 0 2.00
Franklin Resources 3 6 1 0 1.80

Fortress Investment Group currently has a consensus target price of $6.00, suggesting a potential downside of 24.91%. Franklin Resources has a consensus target price of $43.33, suggesting a potential downside of 2.99%. Given Franklin Resources’ higher possible upside, analysts clearly believe Franklin Resources is more favorable than Fortress Investment Group.

Earnings and Valuation

This table compares Fortress Investment Group and Franklin Resources’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Fortress Investment Group $950.66 million 1.84 $273.52 million $0.44 18.16
Franklin Resources $6.39 billion 3.90 $2.31 billion $3.06 14.60

Franklin Resources has higher revenue and earnings than Fortress Investment Group. Franklin Resources is trading at a lower price-to-earnings ratio than Fortress Investment Group, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Fortress Investment Group has a beta of 1.92, indicating that its stock price is 92% more volatile than the S&P 500. Comparatively, Franklin Resources has a beta of 1.72, indicating that its stock price is 72% more volatile than the S&P 500.

Dividends

Fortress Investment Group pays an annual dividend of $0.36 per share and has a dividend yield of 4.5%. Franklin Resources pays an annual dividend of $0.80 per share and has a dividend yield of 1.8%. Fortress Investment Group pays out 81.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Franklin Resources pays out 26.1% of its earnings in the form of a dividend. Fortress Investment Group has increased its dividend for 35 consecutive years. Fortress Investment Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Fortress Investment Group and Franklin Resources’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Fortress Investment Group 10.61% 38.79% 15.58%
Franklin Resources 27.30% 13.96% 10.41%

Summary

Franklin Resources beats Fortress Investment Group on 10 of the 17 factors compared between the two stocks.

About Fortress Investment Group

Fortress Investment Group LLC (Fortress) is an investment management firm. The Company operates through segments, including private equity funds, permanent capital vehicles, credit hedge funds, credit PE funds, liquid hedge funds and Logan Circle. Its business is to sponsor the formation of, and provide investment management services for, various investment funds, permanent capital vehicles and related managed accounts (the Fortress Funds). Fortress’s sources of income from the Fortress Funds are management fees, incentive income and investment income on its investments in the funds. As of December 31, 2016, the Company’s private equity business manages approximately $13.5 billion of assets under management (AUM); credit funds business manages approximately $18.1 billion of AUM; liquid hedge funds business manages over $4.6 billion of AUM, and Logan Circle business manages approximately $33.4 billion of AUM.

About Franklin Resources

Franklin Resources, Inc. is a holding company. The Company, along with its subsidiaries, operates as Franklin Templeton Investments. It is a global investment management company that provides investment management and related services to retail, institutional and high net-worth clients in jurisdictions around the world. The Company offers its investment products and services under the Franklin, Templeton, Franklin Mutual Series, Franklin Bissett, Fiduciary Trust, Darby, Balanced Equity Management, K2 and LibertyShares brand names. Its products include investment funds and institutional, high net-worth and separately managed accounts (collectively, sponsored investment products (SIPs)). It offers various types of SIPs, such as the United States funds, cross-border funds, local/regional funds, and other managed accounts, alternative investment products and trusts. Its investment funds include the United States-registered funds, non-United States-registered funds and unregistered funds.

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