NetSpend (NASDAQ: NTSP) and Capital One Financial (NYSE:COF) are both financials companies, but which is the better stock? We will contrast the two businesses based on the strength of their dividends, valuation, risk, earnings, profitability, institutional ownership and analyst recommendations.

Profitability

This table compares NetSpend and Capital One Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
NetSpend N/A N/A N/A
Capital One Financial 13.34% 8.25% 1.13%

Analyst Ratings

This is a summary of current ratings for NetSpend and Capital One Financial, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
NetSpend 0 0 0 0 N/A
Capital One Financial 2 11 11 1 2.44

Capital One Financial has a consensus target price of $95.20, suggesting a potential upside of 2.67%.

Dividends

Capital One Financial pays an annual dividend of $1.60 per share and has a dividend yield of 1.7%. NetSpend does not pay a dividend. Capital One Financial pays out 22.6% of its earnings in the form of a dividend. NetSpend has increased its dividend for 4 consecutive years.

Institutional and Insider Ownership

88.4% of Capital One Financial shares are owned by institutional investors. 1.7% of Capital One Financial shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares NetSpend and Capital One Financial’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
NetSpend N/A N/A N/A $0.44 N/A
Capital One Financial $27.52 billion 1.63 $3.75 billion $7.07 13.11

Capital One Financial has higher revenue and earnings than NetSpend. NetSpend is trading at a lower price-to-earnings ratio than Capital One Financial, indicating that it is currently the more affordable of the two stocks.

Summary

Capital One Financial beats NetSpend on 10 of the 12 factors compared between the two stocks.

NetSpend Company Profile

NetSpend Holdings, Inc. (NetSpend) is a provider of general-purpose reloadable prepaid debit cards (GPR) cards, and related alternative financial services to underbanked consumers in the United States. NetSpend’s GPR cards are tied to the Federal Deposit Insurance Corporation (FDIC)-insured depository accounts and can be used to make purchase transactions at any merchant that participates in the MasterCard, Visa or PULSE networks and to withdraw funds at participating automated teller machines (ATMs). The Company also offers to its cardholders direct deposit, interest-bearing savings accounts, bill pay and card-to-card transfer functionality, personal financial management tools and online and mobile phone card account access. As of December 31, 2010, the Company marketed its GPR cards through approximately 750 retail distributors at approximately 39,000 locations. As of August 21, 2010, the Company ceased marketing gift cards.

Capital One Financial Company Profile

Capital One Financial Corporation is a diversified financial services holding company. The Company, along with its subsidiaries, offers a range of financial products and services to consumers, small businesses and commercial clients through branches, the Internet and other distribution channels. The Company’s segments include Credit Card, Consumer Banking, Commercial Banking and Other. The Credit Card segment consists of its domestic consumer and small business card lending, and the international card lending businesses in Canada and the United Kingdom. The Consumer Banking segment consists of its branch-based lending and deposit gathering activities for consumers and small businesses, national deposit gathering, national auto lending and consumer home loan lending and servicing activities. The Commercial Banking consists of its lending, deposit gathering and treasury management services to commercial real estate, and commercial and industrial customers.

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