LegacyTexas Financial Group (NASDAQ: LTXB) and Bank of America Corporation (NYSE:BAC) are both finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, valuation, earnings, analyst recommendations, risk, institutional ownership and dividends.

Profitability

This table compares LegacyTexas Financial Group and Bank of America Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
LegacyTexas Financial Group 25.44% 10.94% 1.14%
Bank of America Corporation 20.28% 8.11% 0.89%

Analyst Ratings

This is a summary of current recommendations and price targets for LegacyTexas Financial Group and Bank of America Corporation, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
LegacyTexas Financial Group 0 2 3 0 2.60
Bank of America Corporation 1 8 22 2 2.76

LegacyTexas Financial Group currently has a consensus target price of $44.38, indicating a potential upside of 20.39%. Bank of America Corporation has a consensus target price of $24.44, indicating a potential upside of 0.26%. Given LegacyTexas Financial Group’s higher probable upside, research analysts clearly believe LegacyTexas Financial Group is more favorable than Bank of America Corporation.

Dividends

LegacyTexas Financial Group pays an annual dividend of $0.60 per share and has a dividend yield of 1.6%. Bank of America Corporation pays an annual dividend of $0.48 per share and has a dividend yield of 2.0%. LegacyTexas Financial Group pays out 28.7% of its earnings in the form of a dividend. Bank of America Corporation pays out 28.6% 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. Bank of America Corporation has increased its dividend for 3 consecutive years. Bank of America Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

This table compares LegacyTexas Financial Group and Bank of America Corporation’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
LegacyTexas Financial Group $307.99 million 5.75 $100.34 million $2.09 17.64
Bank of America Corporation $83.52 billion 3.07 $17.67 billion $1.68 14.51

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

Institutional & Insider Ownership

82.3% of LegacyTexas Financial Group shares are owned by institutional investors. Comparatively, 61.7% of Bank of America Corporation shares are owned by institutional investors. 3.3% of LegacyTexas Financial Group shares are owned by insiders. Comparatively, 0.2% of Bank of America Corporation shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Volatility & Risk

LegacyTexas Financial Group has a beta of 1.16, indicating that its stock price is 16% more volatile than the S&P 500. Comparatively, Bank of America Corporation has a beta of 1.26, indicating that its stock price is 26% more volatile than the S&P 500.

LegacyTexas Financial Group Company Profile

LegacyTexas Financial Group, Inc. is a bank holding company. LegacyTexas Bank (the Bank) is the Company’s principal operating subsidiary, which is a commercial bank that is focused on meeting the needs of businesses and consumers in the North Texas area. Its principal business consists of attracting retail deposits from general public and business community and investing those funds, along with borrowed funds, in commercial real estate loans, secured and unsecured commercial and industrial loans, as well as permanent loans secured by first and second mortgages on one- to four-family residences and consumer loans. Its Warehouse Purchase Program allows mortgage banking company customers to close one- to four-family real estate loans in their own name and manage its cash flow needs until the loans are sold to investors. It offers title services, as well as brokerage services for purchase and sale of non-deposit investment and insurance products through a third-party brokerage arrangement.

Bank of America Corporation Company Profile

Bank of America Corporation is a bank holding company and a financial holding company. The Company is a financial institution, serving individual consumers and others with a range of banking, investing, asset management and other financial and risk management products and services. The Company, through its banking and various non-bank subsidiaries, throughout the United States and in international markets, provides a range of banking and non-bank financial services and products through four business segments: Consumer Banking, which comprises Deposits and Consumer Lending; Global Wealth & Investment Management, which consists of two primary businesses: Merrill Lynch Global Wealth Management and U.S. Trust, Bank of America Private Wealth Management; Global Banking, which provides a range of lending-related products and services; Global Markets, which offers sales and trading services, and All Other, which consists of equity investments, residual expense allocations and other.

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