Waddell & Reed Financial (NYSE:WDR) and Jefferies Financial Group (NYSE:JEF) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, earnings, dividends, profitability, risk, institutional ownership and analyst recommendations.

Profitability

This table compares Waddell & Reed Financial and Jefferies Financial Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Waddell & Reed Financial 15.09% 19.31% 13.23%
Jefferies Financial Group N/A N/A N/A

Earnings and Valuation

This table compares Waddell & Reed Financial and Jefferies Financial Group’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Waddell & Reed Financial $1.16 billion 1.09 $183.59 million $2.28 7.41
Jefferies Financial Group $5.01 billion 1.07 $1.03 billion $0.81 22.20

Jefferies Financial Group has higher revenue and earnings than Waddell & Reed Financial. Waddell & Reed Financial is trading at a lower price-to-earnings ratio than Jefferies Financial Group, indicating that it is currently the more affordable of the two stocks.

Dividends

Waddell & Reed Financial pays an annual dividend of $1.00 per share and has a dividend yield of 5.9%. Jefferies Financial Group pays an annual dividend of $0.50 per share and has a dividend yield of 2.8%. Waddell & Reed Financial pays out 43.9% of its earnings in the form of a dividend. Jefferies Financial Group pays out 61.7% 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. Waddell & Reed Financial is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of current ratings and price targets for Waddell & Reed Financial and Jefferies Financial Group, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Waddell & Reed Financial 4 2 1 0 1.57
Jefferies Financial Group 0 0 1 0 3.00

Waddell & Reed Financial presently has a consensus target price of $18.43, indicating a potential upside of 9.13%. Jefferies Financial Group has a consensus target price of $29.50, indicating a potential upside of 64.07%. Given Jefferies Financial Group’s stronger consensus rating and higher probable upside, analysts clearly believe Jefferies Financial Group is more favorable than Waddell & Reed Financial.

Institutional and Insider Ownership

98.2% of Waddell & Reed Financial shares are owned by institutional investors. Comparatively, 76.0% of Jefferies Financial Group shares are owned by institutional investors. 2.1% of Waddell & Reed Financial shares are owned by insiders. Comparatively, 10.0% of Jefferies Financial 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.

Risk & Volatility

Waddell & Reed Financial has a beta of 1.51, suggesting that its share price is 51% more volatile than the S&P 500. Comparatively, Jefferies Financial Group has a beta of 1.4, suggesting that its share price is 40% more volatile than the S&P 500.

Summary

Waddell & Reed Financial beats Jefferies Financial Group on 9 of the 15 factors compared between the two stocks.

About Waddell & Reed Financial

Waddell & Reed Financial, Inc., through its subsidiaries, provides investment management and advisory, investment product underwriting and distribution, and shareholder services administration to mutual funds, and institutional and separately managed accounts in the United States. The company acts as an investment adviser for institutional and other private investors, and provides sub advisory services to other investment companies; and underwrites and distributes registered open-end mutual fund portfolios. It also offers fee-based asset allocation investment advisory products to advisors channel customers; distributes business partners' variable annuity products, and retirement and life insurance products to advisors channel customers; and sells life insurance and disability products underwritten by various carriers. The company distributes investment products through its wholesale channel comprising other broker/dealers, various retirement platforms, and registered investment advisors, as well as through independent financial advisors; and markets investment advisory services to institutional investors directly or through consultants. Waddell & Reed Financial, Inc. was founded in 1937 and is based in Overland Park, Kansas.

About Jefferies Financial Group

Jefferies Financial Group Inc., a financial services company, engages in investment banking and capital markets, asset management, and direct investing businesses in the Americas, Europe, and Asia. the company also offers equities research, sales, and trading services; equity finance services comprising financing, securities lending, and other prime brokerage services; and wealth management services to high net worth individuals, their families and businesses, private equity and venture funds, and small institutions. In addition, it provides fixed income sales and trading services for investment grade corporate bonds, U.S. and European government and agency securities, municipal bonds, mortgage- and asset-backed securities, leveraged loans, consumer loans, securities, markets debt, interest rate, and credit derivative products, as well as foreign exchange trade execution and securitization capabilities, as well as manages, invests in, and provides services to a group of alternative asset management platforms in investment strategies and asset classes. The company was formerly known as Leucadia National Corporation and changed its name to Jefferies Financial Group Inc. in May 2018. Jefferies Financial Group Inc. was founded in 1968 and is headquartered in New York, New York.

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