Broadridge Financial Solutions (NYSE: BR) and Morningstar (NASDAQ:MORN) are both mid-cap business services companies, but which is the better business? We will contrast the two companies based on the strength of their dividends, valuation, analyst recommendations, institutional ownership, risk, profitability and earnings.

Dividends

Broadridge Financial Solutions pays an annual dividend of $1.46 per share and has a dividend yield of 1.8%. Morningstar pays an annual dividend of $0.92 per share and has a dividend yield of 1.1%. Broadridge Financial Solutions pays out 53.5% of its earnings in the form of a dividend. Morningstar pays out 24.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Morningstar has increased its dividend for 9 consecutive years.

Institutional & Insider Ownership

83.8% of Broadridge Financial Solutions shares are held by institutional investors. Comparatively, 38.3% of Morningstar shares are held by institutional investors. 3.5% of Broadridge Financial Solutions shares are held by insiders. Comparatively, 57.4% of Morningstar shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares Broadridge Financial Solutions and Morningstar’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Broadridge Financial Solutions $4.14 billion 2.27 $704.70 million $2.73 29.60
Morningstar $847.00 million 4.27 $228.30 million $3.82 22.25

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

Analyst Ratings

This is a summary of current ratings for Broadridge Financial Solutions and Morningstar, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Broadridge Financial Solutions 0 2 0 0 2.00
Morningstar 0 0 0 0 N/A

Broadridge Financial Solutions currently has a consensus price target of $74.00, indicating a potential downside of 8.44%. Given Broadridge Financial Solutions’ higher possible upside, equities analysts plainly believe Broadridge Financial Solutions is more favorable than Morningstar.

Profitability

This table compares Broadridge Financial Solutions and Morningstar’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Broadridge Financial Solutions 7.89% 37.99% 12.30%
Morningstar 19.43% 15.55% 8.52%

Volatility and Risk

Broadridge Financial Solutions has a beta of 0.99, indicating that its stock price is 1% less volatile than the S&P 500. Comparatively, Morningstar has a beta of 0.74, indicating that its stock price is 26% less volatile than the S&P 500.

Summary

Broadridge Financial Solutions beats Morningstar on 8 of the 15 factors compared between the two stocks.

Broadridge Financial Solutions Company Profile

Broadridge Financial Solutions, Inc. (Broadridge) is a provider of investor communications and technology-driven solutions to banks, broker-dealers, mutual funds and corporate issuers. The Company’s segments include Investor Communication Solutions, and Global Technology and Operations. The Company offers Bank/Broker-Dealer Investor Communication Solutions, Customer Communication Solutions, Corporate Issuer Solutions, Advisor Solutions and Mutual Fund and Retirement Solutions through Investor Communication Solutions segment. The Company offers a middle- and back-office securities processing platform for North American and global broker-dealers. Its services include investor and customer communications, securities processing, and data and analytics solutions. The Company delivers a range of solutions that helps its clients serve their retail and institutional customers across the entire investment lifecycle, including pre-trade, trade, and post-trade processing functionality.

Morningstar Company Profile

Morningstar, Inc. is a provider of independent investment research in North America, Europe, Australia, and Asia. The Company focuses to create products that help investors reach their financial goals. It offers a range of data, software, research, and investment management offerings for financial advisors, asset managers, sponsors, and individual investors. It provides data and research insights on a range of investment offerings, including managed investment products, listed companies, capital markets, and real-time global market data. It conducts its business operations outside of the United States through subsidiaries in countries, including Australia, Brazil, Canada, Chile, Denmark, France, Germany, India, Italy, Japan, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, People’s Republic of China (both Hong Kong and the mainland), Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, the United Arab Emirates, and the United Kingdom.

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