INTL Fcstone (NASDAQ: INTL) and NewStar Financial (NASDAQ:NEWS) are both small-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their analyst recommendations, profitability, earnings, institutional ownership, risk, dividends and valuation.

Volatility and Risk

INTL Fcstone has a beta of 1.71, meaning that its share price is 71% more volatile than the S&P 500. Comparatively, NewStar Financial has a beta of 2.09, meaning that its share price is 109% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings for INTL Fcstone and NewStar Financial, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
INTL Fcstone 0 0 0 0 N/A
NewStar Financial 0 2 0 0 2.00

NewStar Financial has a consensus price target of $11.00, indicating a potential upside of Infinity. Given NewStar Financial’s higher possible upside, analysts plainly believe NewStar Financial is more favorable than INTL Fcstone.

Earnings & Valuation

This table compares INTL Fcstone and NewStar Financial’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
INTL Fcstone $29.42 billion 0.03 $6.40 million $0.31 139.84
NewStar Financial $304.98 million 0.00 $28.22 million $0.10 N/A

NewStar Financial has lower revenue, but higher earnings than INTL Fcstone. NewStar Financial is trading at a lower price-to-earnings ratio than INTL Fcstone, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

65.0% of INTL Fcstone shares are held by institutional investors. Comparatively, 73.4% of NewStar Financial shares are held by institutional investors. 20.5% of INTL Fcstone shares are held by insiders. Comparatively, 8.1% of NewStar Financial 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.

Dividends

NewStar Financial pays an annual dividend of $0.08 per share. INTL Fcstone does not pay a dividend. NewStar Financial pays out 80.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares INTL Fcstone and NewStar Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
INTL Fcstone 0.02% 1.41% 0.10%
NewStar Financial 20.84% 2.80% 0.46%

Summary

NewStar Financial beats INTL Fcstone on 7 of the 12 factors compared between the two stocks.

About INTL Fcstone

INTL Fcstone Inc. is a financial services company. The Company provides financial products, and advisory and execution service. The Company operates through five segments: Commercial Hedging, Global Payments, Securities, Physical Commodities, and Clearing and Execution Services (CES). The Commercial Hedging segment serves its commercial clients through its team of risk management consultants. The Global Payments segment provides global payment solutions to banks and commercial businesses, as well as charities and non-governmental organizations and government organizations. The Securities segment provides solutions that facilitate cross-border trading. The Physical Commodities segment consists of its physical precious metals trading and physical agricultural and energy commodity businesses. The CES segment seeks to provide clearing and execution of exchange-traded futures and options for the institutional and trader market segments.

About NewStar Financial

NewStar Financial, Inc. (NewStar) is a commercial finance company. The Company operates through two segments: Commercial Lending and Asset Management. The Commercial Lending segment represents its direct lending activities, which are focused on providing a range of flexible senior secured debt options to mid-sized companies. The Asset Management segment represents its investment advisory activities, which are focused on providing opportunities for qualified investors to invest in a range of credit funds managed by the Company. The Company’s direct lending activities are focused on meeting the financial needs of companies and private investors in the middle market by offering a range of debt financing options. Through its asset management platforms, NewStar offers a range of investment products employing credit-oriented strategies focused on middle market loans and liquid, tradeable credit.

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