Analyzing UBS (UBS) and Legg Mason (LM)

UBS (NYSE: UBS) and Legg Mason (NYSE:LM) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their dividends, earnings, institutional ownership, analyst recommendations, valuation, profitability and risk.

Earnings and Valuation

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This table compares UBS and Legg Mason’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
UBS $43.95 billion 1.52 $1.07 billion $1.07 16.23
Legg Mason $2.89 billion 1.15 $227.25 million $3.32 11.79

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

Dividends

UBS pays an annual dividend of $0.60 per share and has a dividend yield of 3.5%. Legg Mason pays an annual dividend of $1.12 per share and has a dividend yield of 2.9%. UBS pays out 56.1% of its earnings in the form of a dividend. Legg Mason pays out 33.7% 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. Legg Mason has increased its dividend for 8 consecutive years.

Profitability

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

Net Margins Return on Equity Return on Assets
UBS 3.16% 7.96% 0.47%
Legg Mason 11.43% 8.21% 3.98%

Analyst Ratings

This is a breakdown of recent ratings and price targets for UBS and Legg Mason, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
UBS 1 3 5 0 2.44
Legg Mason 2 4 3 0 2.11

Legg Mason has a consensus price target of $47.00, indicating a potential upside of 20.05%. Given Legg Mason’s higher possible upside, analysts clearly believe Legg Mason is more favorable than UBS.

Institutional & Insider Ownership

36.7% of UBS shares are held by institutional investors. Comparatively, 91.5% of Legg Mason shares are held by institutional investors. 1.0% of UBS shares are held by company insiders. Comparatively, 12.7% of Legg Mason shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Volatility and Risk

UBS has a beta of 1.33, suggesting that its share price is 33% more volatile than the S&P 500. Comparatively, Legg Mason has a beta of 2.05, suggesting that its share price is 105% more volatile than the S&P 500.

Summary

Legg Mason beats UBS on 10 of the 17 factors compared between the two stocks.

About UBS

UBS Group AG, together with its subsidiaries, provides financial advice and solutions worldwide. It operates through five divisions: Wealth Management, Wealth Management Americas, Personal & Corporate Banking, Asset Management, and Investment Bank. The Wealth Management division offers advisory and financial services to wealthy private clients. This segment provides banking and lending solutions, wealth planning, investment management solutions, and corporate finance advice. The Wealth Management Americas division offers wealth management solutions designed to address the needs of high and ultra high net worth clients. This division operates the United States and Canadian wealth management businesses; and international business booked in the United States. The Personal & Corporate Banking division provides financial products and services to private, corporate, and institutional clients in Switzerland. The Asset Management division offers investment management products and services comprising equities, asset allocation and currency investment strategies, hedge funds, fixed income products, real estate strategies, and infrastructure and private equity products; multi-manager hedge fund solutions and advisory services; and customized multi-asset solutions and advisory services. The Investment Bank division provides advisory, debt and equity capital market, and financing solutions, as well as risk management services, such as corporate lending and associated hedging for wealth management, personal and corporate banking, and asset management businesses serving the corporate, institutional, and wealth management clients. This division also offers cash, derivatives, and financing; foreign exchange, precious metals, rates, and credit; and securities research services. The company was formerly known as UBS AG and changed its name to UBS Group AG in December 2014. UBS Group AG was founded in 1862 and is headquartered in Zurich, Switzerland.

About Legg Mason

Legg Mason, Inc. is a publicly owned asset management holding company. Through its subsidiaries, the firm provides investment management and related services to company-sponsored mutual funds and other investment vehicles including pension funds, foundations, endowments, sovereign wealth funds, insurance companies, private banks, family offices, individuals, as well as to global, institutional, and retail clients. It launches and manages equity, fixed income, and multi-asset customized portfolios through its subsidiaries. The firm also launches and manages mutual funds and exchange traded funds for its clients through its subsidiaries. It invests in private and public equity, fixed income, and multi asset markets across the globe through its subsidiaries. Through its subsidiaries, the firm also invests in alternative markets. It also employs a combination of fundamental and quantitative research to make its investments through its subsidiaries. Legg Mason, Inc. was founded in 1899 and is based in Baltimore, Maryland.

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