Franklin Resources (NYSE: BEN) and Legg Mason (NYSE:LM) are both mid-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their risk, dividends, analyst recommendations, institutional ownership, valuation, earnings and profitability.

Profitability

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

Net Margins Return on Equity Return on Assets
Franklin Resources 27.30% 13.96% 10.41%
Legg Mason 8.21% 6.84% 3.35%

Volatility & Risk

Franklin Resources has a beta of 1.73, meaning that its share price is 73% more volatile than the S&P 500. Comparatively, Legg Mason has a beta of 2.21, meaning that its share price is 121% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current recommendations for Franklin Resources and Legg Mason, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Franklin Resources 3 6 1 0 1.80
Legg Mason 2 3 4 0 2.22

Franklin Resources presently has a consensus price target of $43.33, indicating a potential upside of 1.03%. Legg Mason has a consensus price target of $42.50, indicating a potential upside of 11.87%. Given Legg Mason’s stronger consensus rating and higher possible upside, analysts clearly believe Legg Mason is more favorable than Franklin Resources.

Valuation and Earnings

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

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Franklin Resources $6.39 billion 3.74 $2.31 billion $3.06 14.02
Legg Mason $2.98 billion 1.19 $572.31 million $2.41 15.76

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

Insider & Institutional Ownership

45.0% of Franklin Resources shares are owned by institutional investors. Comparatively, 82.3% of Legg Mason shares are owned by institutional investors. 21.6% of Franklin Resources shares are owned by insiders. Comparatively, 12.7% of Legg Mason shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Dividends

Franklin Resources pays an annual dividend of $0.80 per share and has a dividend yield of 1.9%. Legg Mason pays an annual dividend of $1.12 per share and has a dividend yield of 2.9%. Franklin Resources pays out 26.1% of its earnings in the form of a dividend. Legg Mason pays out 46.5% 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. Franklin Resources has increased its dividend for 7 consecutive years and Legg Mason has increased its dividend for 35 consecutive years. Legg Mason is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Franklin Resources beats Legg Mason on 9 of the 17 factors compared between the two stocks.

Franklin Resources Company Profile

Franklin Resources, Inc. is a holding company. The Company, along with its subsidiaries, operates as Franklin Templeton Investments. It is a global investment management company that provides investment management and related services to retail, institutional and high net-worth clients in jurisdictions around the world. The Company offers its investment products and services under the Franklin, Templeton, Franklin Mutual Series, Franklin Bissett, Fiduciary Trust, Darby, Balanced Equity Management, K2 and LibertyShares brand names. Its products include investment funds and institutional, high net-worth and separately managed accounts (collectively, sponsored investment products (SIPs)). It offers various types of SIPs, such as the United States funds, cross-border funds, local/regional funds, and other managed accounts, alternative investment products and trusts. Its investment funds include the United States-registered funds, non-United States-registered funds and unregistered funds.

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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