Fifth Street Asset Management (OTCMKTS: FSAM) and Financial Engines (NASDAQ:FNGN) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their risk, valuation, institutional ownership, earnings, dividends, profitability and analyst recommendations.

Profitability

This table compares Fifth Street Asset Management and Financial Engines’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Fifth Street Asset Management -20.92% -626.41% -2.71%
Financial Engines 10.56% 7.60% 6.95%

Insider and Institutional Ownership

8.6% of Fifth Street Asset Management shares are held by institutional investors. 85.4% of Fifth Street Asset Management shares are held by company insiders. Comparatively, 9.3% of Financial Engines shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Dividends

Fifth Street Asset Management pays an annual dividend of $0.25 per share and has a dividend yield of 6.2%. Financial Engines pays an annual dividend of $0.28 per share and has a dividend yield of 0.9%. Fifth Street Asset Management pays out -39.7% of its earnings in the form of a dividend. Financial Engines pays out 36.4% 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. Fifth Street Asset Management is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares Fifth Street Asset Management and Financial Engines’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Fifth Street Asset Management $82.55 million 2.50 -$1.53 million ($0.63) -6.43
Financial Engines $423.94 million 4.41 $28.56 million $0.77 38.38

Financial Engines has higher revenue and earnings than Fifth Street Asset Management. Fifth Street Asset Management is trading at a lower price-to-earnings ratio than Financial Engines, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings for Fifth Street Asset Management and Financial Engines, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Fifth Street Asset Management 0 0 0 0 N/A
Financial Engines 1 1 5 0 2.57

Financial Engines has a consensus target price of $38.33, indicating a potential upside of 29.72%. Given Financial Engines’ higher possible upside, analysts plainly believe Financial Engines is more favorable than Fifth Street Asset Management.

Risk & Volatility

Fifth Street Asset Management has a beta of 0.34, meaning that its share price is 66% less volatile than the S&P 500. Comparatively, Financial Engines has a beta of 2.14, meaning that its share price is 114% more volatile than the S&P 500.

Summary

Financial Engines beats Fifth Street Asset Management on 11 of the 15 factors compared between the two stocks.

About Fifth Street Asset Management

Fifth Street Asset Management Inc. is an alternative asset manager. The Company provides asset management services to its investment funds (the Fifth Street Funds or the funds), which consist of Fifth Street Finance Corp. (FSC) and Fifth Street Senior Floating Rate Corp. (FSFR), both publicly-traded business development companies (together, the BDCs). Its segment provides asset management services to the Fifth Street Funds. The Company conducts all of its operations through its subsidiaries, Fifth Street Management LLC (FSM), Fifth Street CLO Management LLC (CLO Management) and FSCO GP LLC (FSCO GP). The funds, managed by the Company, provide financing solutions to small and mid-sized companies across their capital structures, mainly in connection with investments by private equity sponsors. It provides credit solutions across the capital structure, including one-stop financing, unitranche debt, senior secured debt, mezzanine debt, equity co-investments and venture debt financing.

About Financial Engines

Financial Engines, Inc. is a provider of independent, technology-enabled financial advisory services, discretionary portfolio management, personalized investment advice, financial and retirement income planning, and financial education and guidance. The Company offers personalized plans for saving, investing, and generating retirement income, as well as by providing assessments of retirement income needs and readiness. The Company’s advice and planning services cover employer-sponsored defined contribution (DC) accounts (401(k), 457, and 403(b) plans), individual retirement account (IRA) accounts, and taxable accounts. For individuals, the Company provides discretionary portfolio management, personalized investment advice, financial and retirement income planning, financial education and guidance. The Company maintains two types of relationships with individuals: DC plan participants in the workplace and Individuals outside the workplace.

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