Houlihan Lokey (NYSE: BSIG) and Brightsphere Investment Group (NYSE:BSIG) are both finance companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, valuation, analyst recommendations, profitability, earnings, dividends and risk.

Dividends

Houlihan Lokey pays an annual dividend of $1.08 per share and has a dividend yield of 2.3%. Brightsphere Investment Group pays an annual dividend of $0.27 per share and has a dividend yield of 2.2%. Houlihan Lokey pays out 45.2% of its earnings in the form of a dividend. Brightsphere Investment Group pays out 16.7% 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. Houlihan Lokey has raised its dividend for 2 consecutive years. Houlihan Lokey is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings & Valuation

This table compares Houlihan Lokey and Brightsphere Investment Group’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Houlihan Lokey $963.36 million 3.15 $172.28 million $2.39 19.25
Brightsphere Investment Group $887.40 million 1.55 $4.20 million $1.62 7.71

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

Analyst Recommendations

This is a summary of current ratings for Houlihan Lokey and Brightsphere Investment Group, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Houlihan Lokey 0 2 5 0 2.71
Brightsphere Investment Group 0 1 5 0 2.83

Houlihan Lokey currently has a consensus price target of $51.29, suggesting a potential upside of 11.47%. Brightsphere Investment Group has a consensus price target of $19.67, suggesting a potential upside of 57.46%. Given Brightsphere Investment Group’s stronger consensus rating and higher probable upside, analysts clearly believe Brightsphere Investment Group is more favorable than Houlihan Lokey.

Profitability

This table compares Houlihan Lokey and Brightsphere Investment Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Houlihan Lokey 16.85% 19.74% 13.13%
Brightsphere Investment Group 3.06% 138.53% 13.71%

Insider & Institutional Ownership

51.7% of Houlihan Lokey shares are owned by institutional investors. Comparatively, 1.3% of Brightsphere Investment Group shares are owned by institutional investors. 80.5% of Houlihan Lokey shares are owned by insiders. Comparatively, 0.6% of Brightsphere Investment Group shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Summary

Houlihan Lokey beats Brightsphere Investment Group on 10 of the 15 factors compared between the two stocks.

About Houlihan Lokey

Houlihan Lokey, Inc., an investment banking company, provides merger and acquisition (M&A), financing, financial restructuring, and financial advisory services worldwide. It operates in three segments: Corporate Finance, Financial Restructuring, and Financial Advisory Services. The Corporate Finance segment offers general financial advisory services; and advises public and private institutions on buy-side and sell-side transactions, leveraged loans, private mezzanine debt, high-yield debt, initial public offerings, follow-ons, convertibles, equity private placements, private equity, and liability management transactions, as well as financial sponsors on various transactions. It also provides financing solutions and capital-raising advisory services for publicly-held and multinational corporations, financial sponsors, and privately-held companies. The Financial Restructuring segment advises debtors, creditors, and other parties-in-interest related to recapitalization/deleveraging transactions. It also provides a range of advisory services, including structuring, negotiation, and confirmation of plans of reorganization; structuring and analysis of exchange offers; corporate viability assessment; dispute resolution and expert testimony; and procuring debtor in possession financing. The Financial Advisory Services segment offers valuations of various assets, such as companies, illiquid debt and equity securities, and intellectual property. It also provides fairness opinions in connection with M&A and other transactions, and solvency opinions in connection with corporate spin-offs and dividend recapitalizations; and other types of financial opinions in connection with other transactions. In addition, this segment offers dispute resolution and strategic consulting services. It serves corporations, financial sponsors, and government agencies. The company was founded in 1972 and is headquartered in Los Angeles, California.

About Brightsphere Investment Group

BrightSphere Investment Group plc is a publically owned asset management holding company. The firm provides its services to individuals and institutions. It manages separate client focused portfolios through its subsidiaries. The firm also launches equity mutual funds for its clients. It invests in public equity, fixed income, and alternative investment markets through its subsidiaries. The firm was founded in 1980 is based Boston, Massachusetts. It was formally known as OM Asset Management plc. BrightSphere Investment Group plc operates as a former subsidiary of Old Mutual Global Investors.

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