Capital One Financial (NYSE: COF) and NetSpend (NASDAQ:NTSP) are both financials companies, but which is the superior business? We will compare the two businesses based on the strength of their analyst recommendations, dividends, risk, institutional ownership, profitability, valuation and earnings.

Dividends

Capital One Financial pays an annual dividend of $1.60 per share and has a dividend yield of 1.7%. NetSpend does not pay a dividend. Capital One Financial pays out 22.4% of its earnings in the form of a dividend. Capital One Financial has increased its dividend for 4 consecutive years.

Institutional and Insider Ownership

88.4% of Capital One Financial shares are owned by institutional investors. 1.7% of Capital One Financial shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Capital One Financial and NetSpend’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Capital One Financial 13.34% 8.25% 1.13%
NetSpend N/A N/A N/A

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Capital One Financial and NetSpend, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capital One Financial 2 11 11 1 2.44
NetSpend 0 0 0 0 N/A

Capital One Financial currently has a consensus price target of $95.20, indicating a potential upside of 3.48%.

Earnings and Valuation

This table compares Capital One Financial and NetSpend’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Capital One Financial $27.52 billion 1.62 $3.75 billion $7.13 12.90
NetSpend N/A N/A N/A $0.44 N/A

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

Summary

Capital One Financial beats NetSpend on 11 of the 12 factors compared between the two stocks.

About Capital One Financial

Capital One Financial Corporation is a diversified financial services holding company. The Company, along with its subsidiaries, offers a range of financial products and services to consumers, small businesses and commercial clients through branches, the Internet and other distribution channels. The Company’s segments include Credit Card, Consumer Banking, Commercial Banking and Other. The Credit Card segment consists of its domestic consumer and small business card lending, and the international card lending businesses in Canada and the United Kingdom. The Consumer Banking segment consists of its branch-based lending and deposit gathering activities for consumers and small businesses, national deposit gathering, national auto lending and consumer home loan lending and servicing activities. The Commercial Banking consists of its lending, deposit gathering and treasury management services to commercial real estate, and commercial and industrial customers.

About NetSpend

NetSpend Holdings, Inc. (NetSpend) is a provider of general-purpose reloadable prepaid debit cards (GPR) cards, and related alternative financial services to underbanked consumers in the United States. NetSpend’s GPR cards are tied to the Federal Deposit Insurance Corporation (FDIC)-insured depository accounts and can be used to make purchase transactions at any merchant that participates in the MasterCard, Visa or PULSE networks and to withdraw funds at participating automated teller machines (ATMs). The Company also offers to its cardholders direct deposit, interest-bearing savings accounts, bill pay and card-to-card transfer functionality, personal financial management tools and online and mobile phone card account access. As of December 31, 2010, the Company marketed its GPR cards through approximately 750 retail distributors at approximately 39,000 locations. As of August 21, 2010, the Company ceased marketing gift cards.

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