Legg Mason (NYSE: LM) and Noah Holdings (NYSE:NOAH) are both mid-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, earnings, valuation, institutional ownership, risk and dividends.

Profitability

This table compares Legg Mason and Noah Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Legg Mason 8.46% 7.16% 3.49%
Noah Holdings 29.39% 18.42% 11.94%

Volatility and Risk

Legg Mason has a beta of 2.27, suggesting that its share price is 127% more volatile than the S&P 500. Comparatively, Noah Holdings has a beta of 2.61, suggesting that its share price is 161% more volatile than the S&P 500.

Earnings and Valuation

This table compares Legg Mason and Noah Holdings’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Legg Mason $2.89 billion 1.21 $227.25 million $2.56 14.83
Noah Holdings $362.03 million 6.21 $92.73 million $1.61 24.70

Legg Mason has higher revenue and earnings than Noah Holdings. Legg Mason is trading at a lower price-to-earnings ratio than Noah Holdings, indicating that it is currently the more affordable of the two stocks.

Dividends

Legg Mason pays an annual dividend of $1.12 per share and has a dividend yield of 3.0%. Noah Holdings does not pay a dividend. Legg Mason pays out 43.8% of its earnings in the form of a dividend. Legg Mason has increased its dividend for 7 consecutive years.

Analyst Ratings

This is a summary of current recommendations and price targets for Legg Mason and Noah Holdings, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Legg Mason 3 2 5 0 2.20
Noah Holdings 0 0 0 0 N/A

Legg Mason presently has a consensus target price of $43.11, suggesting a potential upside of 13.57%. Given Legg Mason’s higher probable upside, analysts clearly believe Legg Mason is more favorable than Noah Holdings.

Insider & Institutional Ownership

83.2% of Legg Mason shares are held by institutional investors. Comparatively, 41.3% of Noah Holdings shares are held by institutional investors. 12.7% of Legg Mason shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Summary

Legg Mason beats Noah Holdings on 9 of the 16 factors compared between the two stocks.

About Legg Mason

Legg Mason, Inc. is a holding company. The Company and its subsidiaries are principally engaged in providing asset management and related financial services to individuals, institutions, corporations and municipalities. The Company operates through Global Asset Management segment. Global Asset Management provides investment advisory services to institutional and individual clients and to the Company-sponsored investment funds. The Company, through its subsidiaries, provides investment management and related services to institutional and individual clients, Company-sponsored investment funds and retail separately managed account programs. It offers its products and services directly and through various financial intermediaries. It has operations principally in the United States and the United Kingdom and also has offices in Australia, Bahamas, Brazil, Canada, Chile, China, Dubai, France, Germany, Italy, Japan, Luxembourg, Poland, Singapore, Spain, Switzerland and Taiwan.

About Noah Holdings

Noah Holdings Limited is a wealth management service provider with a focus on global wealth investment and asset allocation services for high net worth individuals and enterprises in China. The Company operates through three segments: wealth management, asset management and Internet finance. It also provides Internet finance services to clients in China. It provides direct access to China’s high net worth population. With approximately 1,100 relationship managers in over 130 branch offices, its coverage network includes China’s regions where high net worth population is concentrated, including the Yangtze River Delta, the Pearl River Delta, the Bohai Rim and other regions. Its product offerings consist primarily of over-the-counter (OTC) wealth management and OTC asset management products, mutual fund products and asset management plans originated in China and designed to cater to the needs of China’s high net worth population.

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