Analyzing Stifel Financial (NYSE:SF) and CME Group (NASDAQ:CME)

CME Group (NASDAQ:CME) and Stifel Financial (NYSE:SF) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, risk, earnings, profitability, institutional ownership, valuation and analyst recommendations.

Insider & Institutional Ownership

87.7% of CME Group shares are held by institutional investors. Comparatively, 82.0% of Stifel Financial shares are held by institutional investors. 0.3% of CME Group shares are held by company insiders. Comparatively, 3.4% of Stifel Financial shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of current recommendations and price targets for CME Group and Stifel Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
CME Group	3	6	9	0	2.33
Stifel Financial	0	4	5	0	2.56

CME Group currently has a consensus price target of $292.94, indicating a potential downside of 0.80%. Stifel Financial has a consensus price target of $86.08, indicating a potential upside of 28.72%. Given Stifel Financial’s stronger consensus rating and higher probable upside, analysts plainly believe Stifel Financial is more favorable than CME Group.

Risk & Volatility

CME Group has a beta of 0.24, suggesting that its stock price is 76% less volatile than the S&P 500. Comparatively, Stifel Financial has a beta of 1.01, suggesting that its stock price is 1% more volatile than the S&P 500.

Earnings and Valuation

This table compares CME Group and Stifel Financial”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
CME Group	$6.77 billion	15.68	$4.07 billion	$11.79	25.05
Stifel Financial	$5.53 billion	1.83	$683.78 million	$5.59	11.96

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

Profitability

This table compares CME Group and Stifel Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
CME Group	63.30%	15.60%	2.20%
Stifel Financial	16.11%	19.22%	2.36%

Dividends

CME Group pays an annual dividend of $5.20 per share and has a dividend yield of 1.8%. Stifel Financial pays an annual dividend of $1.36 per share and has a dividend yield of 2.0%. CME Group pays out 44.1% of its earnings in the form of a dividend. Stifel Financial pays out 24.3% 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. Stifel Financial has increased its dividend for 9 consecutive years. Stifel Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Stifel Financial beats CME Group on 9 of the 17 factors compared between the two stocks.

About CME Group

CME Group Inc., together with its subsidiaries, operates contract markets for the trading of futures and options on futures contracts worldwide. It offers futures and options products based on interest rates, equity indexes, foreign exchange, agricultural commodities, energy, and metals, as well as fixed income and foreign currency trading services. The company also provides clearing house services, including clearing, settling, and guaranteeing futures and options contracts, and cleared swaps products traded through its exchanges; and trade processing and risk mitigation services. In addition, the company offers a range of market data services, including real-time and historical data services. It serves professional traders, financial institutions, institutional and individual investors, corporations, manufacturers, producers, governments, and central banks. The company was formerly known as Chicago Mercantile Exchange Holdings Inc. and changed its name to CME Group Inc. in July 2007. The company was founded in 1898 and is headquartered in Chicago, Illinois.

About Stifel Financial

Stifel Financial Corp., a financial services and bank holding company, provides retail and institutional wealth management, and investment banking services to individual investors, corporations, municipalities, and institutions in the United States and internationally. It operates in three segments: Global Wealth Management, Institutional Group, and Other. The company provides private client services, including securities transaction and financial planning services; institutional equity and fixed income sales, trading and research, and municipal finance services; investment banking services, such as mergers and acquisitions, public offerings, and private placements; and retail and commercial banking services comprising personal and commercial lending programs, as well as deposit accounts. It participates in and manages underwritings for corporate and public finance; and offers financial advisory and securities brokerage services. The company was founded in 1890 and is headquartered in Saint Louis, Missouri.