Affiliated Managers Group (NYSE: AMG) and Legg Mason (NYSE:LM) are both mid-cap finance companies, but which is the better stock? We will compare the two companies based on the strength of their profitability, valuation, analyst recommendations, earnings, institutional ownership, risk and dividends.

Profitability

This table compares Affiliated Managers Group and Legg Mason’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Affiliated Managers Group 23.29% 17.63% 8.93%
Legg Mason 8.46% 7.16% 3.49%

Valuation and Earnings

This table compares Affiliated Managers Group and Legg Mason’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Affiliated Managers Group $2.19 billion 4.67 $472.80 million $9.24 19.95
Legg Mason $2.89 billion 1.21 $227.25 million C$2.56 14.87

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

Volatility and Risk

Affiliated Managers Group has a beta of 1.7, suggesting that its share price is 70% more volatile than the S&P 500. Comparatively, Legg Mason has a beta of 2.27, suggesting that its share price is 127% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and target prices for Affiliated Managers Group and Legg Mason, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Affiliated Managers Group 0 2 5 0 2.71
Legg Mason 3 2 5 0 2.20

Affiliated Managers Group currently has a consensus price target of $206.43, indicating a potential upside of 11.97%. Legg Mason has a consensus price target of C$43.11, indicating a potential upside of 13.27%. Given Legg Mason’s higher probable upside, analysts plainly believe Legg Mason is more favorable than Affiliated Managers Group.

Insider and Institutional Ownership

96.0% of Affiliated Managers Group shares are held by institutional investors. Comparatively, 83.2% of Legg Mason shares are held by institutional investors. 1.4% of Affiliated Managers Group shares are held by insiders. Comparatively, 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 stock is poised for long-term growth.

Dividends

Affiliated Managers Group pays an annual dividend of $0.80 per share and has a dividend yield of 0.4%. Legg Mason pays an annual dividend of C$1.12 per share and has a dividend yield of 2.9%. Affiliated Managers Group pays out 8.7% of its earnings in the form of a dividend. Legg Mason pays out 43.8% 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. Legg Mason has increased its dividend for 7 consecutive years. Legg Mason is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Affiliated Managers Group beats Legg Mason on 10 of the 16 factors compared between the two stocks.

Affiliated Managers Group Company Profile

Affiliated Managers Group, Inc. is an asset management company with equity investments in boutique investment management firms. The Company operates in three segments, which represent its principal distribution channels: Institutional, Mutual Fund and High Net Worth. The equity method investments in the Institutional distribution channel are made in relationships with public and private client entities, including foundations, endowments, sovereign wealth funds and retirement plans for corporations and municipalities. The equity method investments in the Mutual Fund distribution channel are made in advisory or sub-advisory relationships with active return-oriented mutual funds, Undertakings for Collective Investment in Transferable Securities and other retail products. The equity method investments in the High Net Worth distribution channel are made in relationships with high net worth and ultra-high net worth individuals, families, trusts, foundations, endowments and retirement plans.

Legg Mason Company Profile

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.

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