Contrasting Hennessy Advisors (NASDAQ:HNNA) and XP (NASDAQ:XP)

XP (NASDAQ:XP) and Hennessy Advisors (NASDAQ:HNNA) are both finance companies, but which is the better stock? We will compare the two businesses based on the strength of their analyst recommendations, valuation, earnings, dividends, institutional ownership, risk and profitability.

Dividends

XP pays an annual dividend of $0.40 per share and has a dividend yield of 1.3%. Hennessy Advisors pays an annual dividend of $0.60 per share and has a dividend yield of 5.8%. XP pays out 20.9% of its earnings in the form of a dividend. Hennessy Advisors pays out 57.7% 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.

Earnings & Valuation

This table compares XP and Hennessy Advisors”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
XP	$3.30 billion	4.96	$925.91 million	$1.91	15.93
Hennessy Advisors	$35.54 million	2.30	$9.96 million	$1.04	9.95

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

Institutional & Insider Ownership

59.2% of XP shares are owned by institutional investors. Comparatively, 10.3% of Hennessy Advisors shares are owned by institutional investors. 36.0% of Hennessy Advisors shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares XP and Hennessy Advisors’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
XP	27.20%	22.19%	1.33%
Hennessy Advisors	24.77%	8.31%	5.48%

Analyst Recommendations

This is a breakdown of recent ratings for XP and Hennessy Advisors, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
XP	0	2	5	0	2.71
Hennessy Advisors	0	1	0	0	2.00

XP presently has a consensus target price of $28.80, indicating a potential downside of 5.33%. Given XP’s stronger consensus rating and higher possible upside, research analysts clearly believe XP is more favorable than Hennessy Advisors.

Risk and Volatility

XP has a beta of 1.01, suggesting that its stock price is 1% more volatile than the S&P 500. Comparatively, Hennessy Advisors has a beta of 0.56, suggesting that its stock price is 44% less volatile than the S&P 500.

Summary

XP beats Hennessy Advisors on 13 of the 16 factors compared between the two stocks.

About XP

XP Inc. provides financial products and services in Brazil. It offers securities brokerage, private pension plans, commercial, and investment banking products, such as loan operations and transactions in the foreign exchange markets and deposits; product structuring and capital markets services for corporate clients and issuers of fixed income products; advisory services for mass-affluent and institutional clients; and wealth management services for high-net-worth customers and institutional clients. The company also offers XP Educação, an online financial education portal that offers seminars, classes, and learning tools to help teach individuals on topics, such as basics of investing, techniques, and investment strategies, as well as insurance brokerage services. In addition, it operates XP Platform, an open product platform that provides clients to access investment products in the market, including equity and fixed income securities, mutual and hedge funds, structured products, life insurance, pension plans, real-estate investment funds, and others. The company was founded in 2001 and is based in São Paulo, Brazil.

About Hennessy Advisors

Hennessy Advisors, Inc. is an employee owned investment manager. It provides its services to Hennessy Funds and investment companies. The firm launches and manages equity, fixed income, and balanced mutual funds. It invests in the public equity and fixed income markets across the globe. The firm primarily invests in growth stocks of companies. It conducts in-house research to make its investments. Hennessy Advisors, Inc. was founded in 1989 and is based in Novato, California with additional offices in Boston, Massachusetts and Chapel Hill, North Carolina.