World Acceptance Corporation (NASDAQ: WRLD) and Synchrony Financial (NYSE:SYF) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, earnings, dividends, profitability, risk, institutional ownership and analyst recommendations.

Profitability

This table compares World Acceptance Corporation and Synchrony Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
World Acceptance Corporation 13.13% 15.75% 8.48%
Synchrony Financial 13.84% 15.30% 2.43%

Institutional and Insider Ownership

96.9% of World Acceptance Corporation shares are owned by institutional investors. Comparatively, 89.6% of Synchrony Financial shares are owned by institutional investors. 27.3% of World Acceptance Corporation shares are owned by insiders. Comparatively, 0.0% of Synchrony Financial shares are owned 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

Synchrony Financial pays an annual dividend of $0.60 per share and has a dividend yield of 1.9%. World Acceptance Corporation does not pay a dividend. Synchrony Financial pays out 22.6% of its earnings in the form of a dividend.

Analyst Ratings

This is a breakdown of current ratings and price targets for World Acceptance Corporation and Synchrony Financial, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
World Acceptance Corporation 3 0 0 0 1.00
Synchrony Financial 0 7 16 0 2.70

World Acceptance Corporation presently has a consensus target price of $52.33, indicating a potential downside of 29.41%. Synchrony Financial has a consensus target price of $37.13, indicating a potential upside of 19.80%. Given Synchrony Financial’s stronger consensus rating and higher probable upside, analysts clearly believe Synchrony Financial is more favorable than World Acceptance Corporation.

Earnings and Valuation

This table compares World Acceptance Corporation and Synchrony Financial’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
World Acceptance Corporation $533.56 million 1.21 $136.07 million $7.98 9.29
Synchrony Financial $7.04 billion 3.50 $2.11 billion $2.65 11.69

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

Risk & Volatility

World Acceptance Corporation has a beta of 2.34, suggesting that its share price is 134% more volatile than the S&P 500. Comparatively, Synchrony Financial has a beta of 1.01, suggesting that its share price is 1% more volatile than the S&P 500.

Summary

Synchrony Financial beats World Acceptance Corporation on 9 of the 16 factors compared between the two stocks.

About World Acceptance Corporation

World Acceptance Corporation operates a small-loan consumer finance business in 15 states and Mexico as of March 31, 2016. The Company offers short-term small installment loans, medium-term larger installment loans, related credit insurance and ancillary products and services to individuals. The Company offers standardized installment loans generally between $300 and $4,000 through 1,339 branches in Alabama, Georgia, Idaho, Illinois, Indiana, Kentucky, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, South Carolina, Texas, Tennessee, Wisconsin and Mexico as of March 31, 2016. The Company generally serves individuals with limited access to other sources of consumer credit, such as banks, credit unions, other consumer finance businesses and credit card lenders. In the United States branches, the Company also offers income tax return preparation services to its loan customers and other individuals.

About Synchrony Financial

Synchrony Financial is a consumer financial services company. The Company provides a range of credit products through programs it has established with a group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers. The Company’s revenue activities are managed through three sales platforms: Retail Card, Payment Solutions and CareCredit. It offers its credit products through its subsidiary, Synchrony Bank (the Bank). Through the Bank, it offers a range of deposit products insured by the Federal Deposit Insurance Corporation (FDIC), including certificates of deposit, individual retirement accounts (IRAs), money market accounts and savings accounts. The Company offers three types of credit products: credit cards, commercial credit products and consumer installment loans. The Company also offers a debt cancellation product. It offers two types of credit cards: private label credit cards and Dual Cards.

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