Legg Mason (NYSE: LM) and Houlihan Lokey (NYSE:HLI) are both mid-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their dividends, earnings, institutional ownership, analyst recommendations, risk, valuation and profitability.
Earnings and Valuation
This table compares Legg Mason and Houlihan Lokey’s gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Legg Mason||$3.14 billion||0.93||$285.07 million||$3.72||9.19|
|Houlihan Lokey||$963.36 million||3.52||$172.28 million||$2.39||21.42|
Legg Mason has higher revenue and earnings than Houlihan Lokey. Legg Mason is trading at a lower price-to-earnings ratio than Houlihan Lokey, indicating that it is currently the more affordable of the two stocks.
Institutional and Insider Ownership
88.9% of Legg Mason shares are held by institutional investors. Comparatively, 46.1% of Houlihan Lokey shares are held by institutional investors. 4.3% of Legg Mason shares are held by company insiders. Comparatively, 69.7% of Houlihan Lokey shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.
This is a summary of recent ratings and recommmendations for Legg Mason and Houlihan Lokey, as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Legg Mason currently has a consensus price target of $47.44, indicating a potential upside of 38.81%. Houlihan Lokey has a consensus price target of $50.00, indicating a potential downside of 2.32%. Given Legg Mason’s higher possible upside, equities research analysts clearly believe Legg Mason is more favorable than Houlihan Lokey.
This table compares Legg Mason and Houlihan Lokey’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Risk & Volatility
Legg Mason has a beta of 1.98, indicating that its share price is 98% more volatile than the S&P 500. Comparatively, Houlihan Lokey has a beta of 0.6, indicating that its share price is 40% less volatile than the S&P 500.
Legg Mason pays an annual dividend of $1.36 per share and has a dividend yield of 4.0%. Houlihan Lokey pays an annual dividend of $1.08 per share and has a dividend yield of 2.1%. Legg Mason pays out 36.6% of its earnings in the form of a dividend. Houlihan Lokey pays out 45.2% 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 raised its dividend for 8 consecutive years. Legg Mason is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Legg Mason beats Houlihan Lokey on 9 of the 17 factors compared between the two stocks.
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.
About Houlihan Lokey
Houlihan Lokey, Inc., an investment banking company, provides mergers and acquisitions (M&A), financings, financial restructurings, and financial advisory services in the United States, Canada, Europe, Asia, Australia, the Middle East, Latin America, and Africa. Its Corporate Finance segment offers general financial advisory services on M&A and capital markets offerings; 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; and advises financial sponsors on various transactions. This segment also provides financing solutions and capital-raising advisory services for publicly-held and multinational corporations, financial sponsors, and privately-held companies. The company's Financial Restructuring segment advises creditors and debtors in connection with recapitalization/deleveraging transactions. It also provides a range of advisory services, including structuring, negotiation, and confirmation on plans of reorganization; structuring and analysis of exchange offers; corporate viability assessment; litigation support and expert testimony; and procuring debtor-in-possession financing. Its Financial Advisory segment provides valuations of various assets and liabilities, including companies, illiquid debt and equity securities, and intellectual property. The company's financial advisory services 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 strategic consulting services and dispute resolution services. It serves corporations, financial sponsors, and government agencies. The company was founded in 1972 and is headquartered in Los Angeles, California.
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