BlackRock (NYSE: BLK) and Legg Mason (NYSE:LM) are both mid-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their risk, institutional ownership, earnings, profitabiliy, dividends, valuation and analyst recommendations.

Valuation & Earnings

This table compares BlackRock and Legg Mason’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
BlackRock $11.52 billion 6.10 $5.05 billion $20.84 20.70
Legg Mason $2.89 billion 1.35 $542.44 million $2.20 18.66

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

Volatility and Risk

BlackRock has a beta of 1.71, meaning that its stock price is 71% more volatile than the S&P 500. Comparatively, Legg Mason has a beta of 2.19, meaning that its stock price is 119% more volatile than the S&P 500.

Institutional & Insider Ownership

80.9% of BlackRock shares are owned by institutional investors. Comparatively, 80.1% of Legg Mason shares are owned by institutional investors. 1.9% of BlackRock shares are owned by company insiders. Comparatively, 12.7% of Legg Mason shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of current recommendations and price targets for BlackRock and Legg Mason, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
BlackRock 0 5 7 0 2.58
Legg Mason 2 2 5 0 2.33

BlackRock presently has a consensus target price of $436.00, suggesting a potential upside of 1.08%. Legg Mason has a consensus target price of $41.13, suggesting a potential upside of 0.18%. Given BlackRock’s stronger consensus rating and higher probable upside, equities research analysts clearly believe BlackRock is more favorable than Legg Mason.

Dividends

BlackRock pays an annual dividend of $10.00 per share and has a dividend yield of 2.3%. Legg Mason pays an annual dividend of $1.12 per share and has a dividend yield of 2.7%. BlackRock pays out 48.0% of its earnings in the form of a dividend. Legg Mason pays out 50.9% 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. BlackRock has raised its dividend for 7 consecutive years and Legg Mason has raised its dividend for 7 consecutive years.

Profitability

This table compares BlackRock and Legg Mason’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
BlackRock 29.92% 11.79% 1.52%
Legg Mason 7.87% 6.71% 3.29%

Summary

BlackRock beats Legg Mason on 12 of the 16 factors compared between the two stocks.

BlackRock Company Profile

BlackRock, Inc. (BlackRock) is an investment management company. BlackRock provides a range of investment and risk management services to institutional and retail clients worldwide. Its diverse platform of active (alpha) and index (beta) investment strategies across asset classes enables the Company to tailor investment outcomes and asset allocation solutions for clients. Its product offerings include single- and multi-asset portfolios investing in equities, fixed income, alternatives and money market instruments. Its products are offered directly and through intermediaries in a range of vehicles, including open-end and closed-end mutual funds, iShares exchange-traded funds (ETFs), separate accounts, collective investment funds and other pooled investment vehicles. It offers its Aladdin investment system, as well as risk management, outsourcing, advisory and technology services, to institutional investors and wealth management intermediaries under the BlackRock Solutions name.

Legg Mason Company Profile

Legg Mason, Inc. is a holding company. The Company and its subsidiaries are principally engaged in providing asset management and related financial services to individuals, institutions, corporations and municipalities. The Company operates through Global Asset Management segment. Global Asset Management provides investment advisory services to institutional and individual clients and to the Company-sponsored investment funds. The Company, through its subsidiaries, provides investment management and related services to institutional and individual clients, Company-sponsored investment funds and retail separately managed account programs. It offers its products and services directly and through various financial intermediaries. It has operations principally in the United States and the United Kingdom and also has offices in Australia, Bahamas, Brazil, Canada, Chile, China, Dubai, France, Germany, Italy, Japan, Luxembourg, Poland, Singapore, Spain, Switzerland and Taiwan.

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