Franklin Resources (NYSE: BEN) and Garrison Capital (NASDAQ:GARS) are both financials companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, earnings, valuation, risk, analyst recommendations, profitability and institutional ownership.

Insider & Institutional Ownership

46.4% of Franklin Resources shares are held by institutional investors. Comparatively, 20.3% of Garrison Capital shares are held by institutional investors. 21.6% of Franklin Resources shares are held by insiders. Comparatively, 5.8% of Garrison Capital shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Franklin Resources and Garrison Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Franklin Resources 26.54% 13.48% 9.92%
Garrison Capital 14.66% 9.33% 4.49%

Volatility and Risk

Franklin Resources has a beta of 1.74, indicating that its share price is 74% more volatile than the S&P 500. Comparatively, Garrison Capital has a beta of 0.24, indicating that its share price is 76% less volatile than the S&P 500.

Valuation & Earnings

This table compares Franklin Resources and Garrison Capital’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Franklin Resources $6.39 billion 3.57 $1.70 billion $3.01 13.69
Garrison Capital $42.95 million 3.19 -$4.80 million $0.33 25.88

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

Analyst Ratings

This is a summary of current ratings and price targets for Franklin Resources and Garrison Capital, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Franklin Resources 3 6 1 0 1.80
Garrison Capital 0 5 1 0 2.17

Franklin Resources currently has a consensus target price of $43.44, indicating a potential upside of 5.42%. Garrison Capital has a consensus target price of $10.33, indicating a potential upside of 21.00%. Given Garrison Capital’s stronger consensus rating and higher probable upside, analysts plainly believe Garrison Capital is more favorable than Franklin Resources.

Dividends

Franklin Resources pays an annual dividend of $0.80 per share and has a dividend yield of 1.9%. Garrison Capital pays an annual dividend of $1.12 per share and has a dividend yield of 13.1%. Franklin Resources pays out 26.6% of its earnings in the form of a dividend. Garrison Capital pays out 339.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Garrison Capital has increased its dividend for 35 consecutive years. Garrison Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Franklin Resources beats Garrison Capital on 12 of the 16 factors compared between the two stocks.

Franklin Resources Company Profile

Franklin Resources, Inc. is a holding company. The Company, along with its subsidiaries, operates as Franklin Templeton Investments. It is a global investment management company that provides investment management and related services to retail, institutional and high net-worth clients in jurisdictions around the world. The Company offers its investment products and services under the Franklin, Templeton, Franklin Mutual Series, Franklin Bissett, Fiduciary Trust, Darby, Balanced Equity Management, K2 and LibertyShares brand names. Its products include investment funds and institutional, high net-worth and separately managed accounts (collectively, sponsored investment products (SIPs)). It offers various types of SIPs, such as the United States funds, cross-border funds, local/regional funds, and other managed accounts, alternative investment products and trusts. Its investment funds include the United States-registered funds, non-United States-registered funds and unregistered funds.

Garrison Capital Company Profile

Garrison Capital Inc. is a managed, closed-end, non-diversified management investment company. The Company’s investment objective is to generate current income and capital appreciation by making investments primarily in debt securities and loans of the United States-based middle-market companies, which it defines as those having annual earnings before interest, taxes and depreciation, or EBITDA, of certain amount. It invests or provides direct lending in first lien senior secured loans, second lien senior secured loans, one-stop senior secured loans or unitranche loans, subordinated or mezzanine loans, unsecured consumer loans and to a lesser extent, selected equity co-investments in middle-market companies. The Company intends to generate risk-adjusted net returns by assembling a portfolio of investments. The Company’s investment advisor is Garrison Capital Advisers LLC.

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