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

Volatility & Risk

Legg Mason has a beta of 2.22, indicating that its share price is 122% more volatile than the S&P 500. Comparatively, Fortress Investment Group has a beta of 1.92, indicating that its share price is 92% more volatile than the S&P 500.

Dividends

Legg Mason pays an annual dividend of $1.12 per share and has a dividend yield of 2.9%. Fortress Investment Group pays an annual dividend of $0.36 per share and has a dividend yield of 4.5%. Legg Mason pays out 46.5% of its earnings in the form of a dividend. Fortress Investment Group pays out 81.8% 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 has raised its dividend for 7 consecutive years.

Analyst Ratings

This is a summary of current ratings and recommmendations for Legg Mason and Fortress Investment Group, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Legg Mason 2 3 4 0 2.22
Fortress Investment Group 0 4 0 0 2.00

Legg Mason presently has a consensus price target of $43.00, indicating a potential upside of 10.40%. Fortress Investment Group has a consensus price target of $6.00, indicating a potential downside of 25.09%. Given Legg Mason’s stronger consensus rating and higher possible upside, equities analysts clearly believe Legg Mason is more favorable than Fortress Investment Group.

Profitability

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

Net Margins Return on Equity Return on Assets
Legg Mason 8.21% 6.84% 3.35%
Fortress Investment Group 10.61% 38.79% 15.58%

Institutional & Insider Ownership

82.3% of Legg Mason shares are owned by institutional investors. Comparatively, 40.2% of Fortress Investment Group shares are owned by institutional investors. 12.7% of Legg Mason shares are owned by company insiders. Comparatively, 45.2% of Fortress Investment Group shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Earnings & Valuation

This table compares Legg Mason and Fortress Investment Group’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Legg Mason $2.98 billion 1.22 $572.31 million $2.41 16.16
Fortress Investment Group $950.66 million 1.85 $273.52 million $0.44 18.20

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

Summary

Legg Mason beats Fortress Investment Group on 10 of the 17 factors compared between the two stocks.

About Legg Mason

Legg Mason, Inc. is a holding company. The Company and its subsidiaries are principally engaged in providing asset management and related financial services to individuals, institutions, corporations and municipalities. The Company operates through Global Asset Management segment. Global Asset Management provides investment advisory services to institutional and individual clients and to the Company-sponsored investment funds. The Company, through its subsidiaries, provides investment management and related services to institutional and individual clients, Company-sponsored investment funds and retail separately managed account programs. It offers its products and services directly and through various financial intermediaries. It has operations principally in the United States and the United Kingdom and also has offices in Australia, Bahamas, Brazil, Canada, Chile, China, Dubai, France, Germany, Italy, Japan, Luxembourg, Poland, Singapore, Spain, Switzerland and Taiwan.

About Fortress Investment Group

Fortress Investment Group LLC (Fortress) is an investment management firm. The Company operates through segments, including private equity funds, permanent capital vehicles, credit hedge funds, credit PE funds, liquid hedge funds and Logan Circle. Its business is to sponsor the formation of, and provide investment management services for, various investment funds, permanent capital vehicles and related managed accounts (the Fortress Funds). Fortress’s sources of income from the Fortress Funds are management fees, incentive income and investment income on its investments in the funds. As of December 31, 2016, the Company’s private equity business manages approximately $13.5 billion of assets under management (AUM); credit funds business manages approximately $18.1 billion of AUM; liquid hedge funds business manages over $4.6 billion of AUM, and Logan Circle business manages approximately $33.4 billion of AUM.

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