Nelnet (NYSE: NNI) and Resources Connection (NASDAQ:RECN) are both finance companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, analyst recommendations, risk, profitability, earnings, valuation and dividends.

Institutional and Insider Ownership

39.7% of Nelnet shares are held by institutional investors. Comparatively, 80.4% of Resources Connection shares are held by institutional investors. 46.1% of Nelnet shares are held by insiders. Comparatively, 11.8% of Resources Connection shares are held by 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.

Volatility and Risk

Nelnet has a beta of 1.06, indicating that its share price is 6% more volatile than the S&P 500. Comparatively, Resources Connection has a beta of 1.19, indicating that its share price is 19% more volatile than the S&P 500.

Valuation & Earnings

This table compares Nelnet and Resources Connection’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Nelnet $1.24 billion 1.73 $256.75 million $5.29 9.96
Resources Connection $583.41 million 0.83 $18.65 million $0.47 34.36

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

Dividends

Nelnet pays an annual dividend of $0.56 per share and has a dividend yield of 1.1%. Resources Connection pays an annual dividend of $0.48 per share and has a dividend yield of 3.0%. Nelnet pays out 10.6% of its earnings in the form of a dividend. Resources Connection pays out 102.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Nelnet and Resources Connection, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Nelnet 0 1 1 0 2.50
Resources Connection 1 1 0 0 1.50

Nelnet presently has a consensus price target of $53.50, indicating a potential upside of 1.52%. Resources Connection has a consensus price target of $14.00, indicating a potential downside of 13.31%. Given Nelnet’s stronger consensus rating and higher possible upside, analysts plainly believe Nelnet is more favorable than Resources Connection.

Profitability

This table compares Nelnet and Resources Connection’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Nelnet 17.51% 8.70% 0.71%
Resources Connection 2.60% 8.08% 5.40%

Summary

Nelnet beats Resources Connection on 11 of the 16 factors compared between the two stocks.

Nelnet Company Profile

Nelnet, Inc. focuses on delivering education-related products and services and student loan asset management. The Company is engaged in student loan servicing, tuition payment processing and school information systems, and communications. The Company’s segments include Loan Systems and Servicing, Tuition Payment Processing and Campus Commerce, Communications, Asset Generation and Management, and Corporate and Other Activities. The Company earns fee-based revenue through its Loan Systems and Servicing, Tuition Payment Processing, and Communications operating segments. In addition, the Company earns interest income on its student loan portfolio in its Asset Generation and Management operating segment. Corporate and Other Activities include real estate and other investments. The Company, through Allo Communications LLC, is engaged in the sale of advanced telecommunication services, including Internet, broadband, telephone, and television services.

Resources Connection Company Profile

Resources Connection, Inc. is a multinational consulting firm. The Company’s operating entities primarily provide services under the name Resources Global Professionals (RGP). The Company provides consulting and business initiative support services to its global client base in the areas of accounting; finance; corporate governance, risk and compliance (GRC) management; corporate advisory, strategic communications and restructuring; information management; human capital; supply chain management, and legal and regulatory. The Company provides its services and solutions to a client base in a range of industries. Its finance and accounting services encompass accounting operations, financial reporting, internal controls, financial analyses and business transactions. It offers a range of technology solutions, which include enterprise resource planning systems; strategic front-of-the-house systems; human resources (HR) information systems, and supply chain management systems, among others.

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