Moelis & Co (NYSE: LM) and Legg Mason (NYSE:LM) are both mid-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, valuation, risk, earnings, analyst recommendations, dividends and institutional ownership.

Dividends

Moelis & Co pays an annual dividend of $1.88 per share and has a dividend yield of 3.4%. Legg Mason pays an annual dividend of $1.36 per share and has a dividend yield of 4.4%. Moelis & Co pays out 82.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Legg Mason pays out 36.6% of its earnings in the form of a dividend. Moelis & Co has raised its dividend for 3 consecutive years and 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.

Volatility and Risk

Moelis & Co has a beta of 1.67, meaning that its share price is 67% more volatile than the S&P 500. Comparatively, Legg Mason has a beta of 1.87, meaning that its share price is 87% more volatile than the S&P 500.

Earnings & Valuation

This table compares Moelis & Co and Legg Mason’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Moelis & Co $684.61 million 4.60 $29.40 million $2.29 24.48
Legg Mason $3.14 billion 0.84 $285.07 million $3.72 8.26

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

Insider & Institutional Ownership

69.3% of Moelis & Co shares are held by institutional investors. Comparatively, 86.6% of Legg Mason shares are held by institutional investors. 29.9% of Moelis & Co shares are held by company insiders. Comparatively, 4.3% of Legg Mason 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.

Profitability

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

Net Margins Return on Equity Return on Assets
Moelis & Co 8.14% 50.56% 23.86%
Legg Mason 11.87% 8.12% 3.90%

Analyst Ratings

This is a breakdown of current recommendations and price targets for Moelis & Co and Legg Mason, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Moelis & Co 0 2 3 0 2.60
Legg Mason 2 4 4 0 2.20

Moelis & Co currently has a consensus target price of $60.40, indicating a potential upside of 7.76%. Legg Mason has a consensus target price of $44.40, indicating a potential upside of 44.58%. Given Legg Mason’s higher possible upside, analysts clearly believe Legg Mason is more favorable than Moelis & Co.

Summary

Legg Mason beats Moelis & Co on 11 of the 17 factors compared between the two stocks.

About Moelis & Co

Moelis & Company is a global investment bank. The firm provides services relating to mergers & acquisitions, recapitalization & restructuring, capital markets and financial institution advisory; private funds; shareholder defense and strategic alliances. The firm's expertise is into global energy; IPO advisory; technology, media, telecommunication sectors. The firm serves clients from 19 geographic locations in the Americas, Europe, the Middle East, Asia and Australia. The firm supports clients through all phases of the business cycle. Moelis & Company was founded in 2007 and is headquartered in New York, New York with additional offices in the United States; Europe; Asia; Australia and Middle East

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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