Waddell & Reed Financial (NYSE: WDR) and Safeguard Scientifics (NYSE:SFE) are both small-cap financials companies, but which is the better business? We will compare the two companies based on the strength of their valuation, risk, earnings, dividends, institutional ownership, profitability and analyst recommendations.

Volatility and Risk

Waddell & Reed Financial has a beta of 2.1, meaning that its share price is 110% more volatile than the S&P 500. Comparatively, Safeguard Scientifics has a beta of 1.29, meaning that its share price is 29% more volatile than the S&P 500.

Institutional & Insider Ownership

97.4% of Waddell & Reed Financial shares are owned by institutional investors. Comparatively, 76.3% of Safeguard Scientifics shares are owned by institutional investors. 3.8% of Waddell & Reed Financial shares are owned by company insiders. Comparatively, 2.1% of Safeguard Scientifics shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Earnings & Valuation

This table compares Waddell & Reed Financial and Safeguard Scientifics’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Waddell & Reed Financial $1.24 billion 1.48 $146.90 million $1.40 15.69
Safeguard Scientifics N/A N/A -$22.26 million ($4.50) -2.46

Waddell & Reed Financial has higher revenue and earnings than Safeguard Scientifics. Safeguard Scientifics is trading at a lower price-to-earnings ratio than Waddell & Reed Financial, indicating that it is currently the more affordable of the two stocks.

Dividends

Waddell & Reed Financial pays an annual dividend of $1.84 per share and has a dividend yield of 8.4%. Safeguard Scientifics does not pay a dividend. Waddell & Reed Financial pays out 131.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Waddell & Reed Financial has raised its dividend for 7 consecutive years.

Profitability

This table compares Waddell & Reed Financial and Safeguard Scientifics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Waddell & Reed Financial 10.10% 16.81% 10.22%
Safeguard Scientifics N/A -68.35% -43.20%

Analyst Ratings

This is a summary of current ratings and price targets for Waddell & Reed Financial and Safeguard Scientifics, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Waddell & Reed Financial 5 2 0 0 1.29
Safeguard Scientifics 0 0 0 0 N/A

Waddell & Reed Financial presently has a consensus price target of $18.71, indicating a potential downside of 14.82%. Safeguard Scientifics has a consensus price target of $13.25, indicating a potential upside of 19.91%. Given Safeguard Scientifics’ higher probable upside, analysts clearly believe Safeguard Scientifics is more favorable than Waddell & Reed Financial.

Summary

Waddell & Reed Financial beats Safeguard Scientifics on 12 of the 14 factors compared between the two stocks.

About Waddell & Reed Financial

Waddell & Reed Financial, Inc., incorporated on December 24, 1981, is a holding company. The Company is a mutual fund and asset management company. The Company provides investment management, investment advisory, investment product underwriting, and distribution and shareholder services administration to Waddell & Reed Advisors group of mutual funds (the Advisors Funds), Ivy Funds, Ivy Funds Variable Insurance Portfolios (Ivy Funds VIP), InvestEd Portfolios and 529 college savings plan (collectively, the Funds), and the Ivy Global Investors Fund SICAV (the SICAV) and its Ivy Global Investors sub-funds (the IGI Funds), and institutional and separately managed accounts. The Company operates its business through a distribution network. Its retail products are distributed through third parties, such as other broker-dealers, registered investment advisors and various retirement platforms or through associated independent contractor financial advisors.

About Safeguard Scientifics

Safeguard Scientifics, Inc. is engaged in providing capital to technology companies within the fields of healthcare, financial services and digital media. The Company holds interest in companies, which it refers to as partner companies. As of December 31, 2016, the Company held interests in 29 non-consolidated partner companies. The Company offers operational and management support to each of its partner companies. In addition to management and operational support, the Company offers ongoing planning and development assessment. It provides mentoring, advice and guidance to develop partner company management. The Company serves on the boards of directors of its partner companies, working with them to develop and implement strategic and operating plans. It measures and monitors achievement of these plans through regular review of operational and financial performance measurements.

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