Nelnet (NYSE: NNI) and The Advisory Board (NASDAQ:ABCO) are both mid-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their dividends, earnings, profitability, institutional ownership, analyst recommendations, valuation and risk.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Nelnet and The Advisory Board, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Nelnet 0 1 1 0 2.50
The Advisory Board 1 11 3 0 2.13

Nelnet presently has a consensus target price of $53.50, indicating a potential downside of 9.09%. The Advisory Board has a consensus target price of $51.44, indicating a potential downside of 4.56%. Given The Advisory Board’s higher possible upside, analysts clearly believe The Advisory Board is more favorable than Nelnet.

Valuation and Earnings

This table compares Nelnet and The Advisory Board’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Nelnet $861.56 million 2.84 $255.88 million $6.16 9.55
The Advisory Board $799.15 million 2.74 $120.83 million $2.69 20.04

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

Insider & Institutional Ownership

40.8% of Nelnet shares are owned by institutional investors. 45.4% of Nelnet shares are owned by insiders. Comparatively, 4.7% of The Advisory Board shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Dividends

Nelnet pays an annual dividend of $0.56 per share and has a dividend yield of 1.0%. The Advisory Board does not pay a dividend. Nelnet pays out 9.1% of its earnings in the form of a dividend.

Profitability

This table compares Nelnet and The Advisory Board’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Nelnet 20.19% 9.65% 0.75%
The Advisory Board 13.65% 12.69% 3.30%

Risk & Volatility

Nelnet has a beta of 1, suggesting that its share price has a similar volatility profile to the S&P 500.Comparatively, The Advisory Board has a beta of 1.33, suggesting that its share price is 33% more volatile than the S&P 500.

Summary

Nelnet beats The Advisory Board on 9 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.

The Advisory Board Company Profile

The Advisory Board Company is a provider of software and solutions to the healthcare and higher education industries. The Company offers subscription-based membership programs, software and data-enabled services. All of its programs are rooted in best practices and extends across four areas, including Best practices research, Technology, Data-enabled services and Consulting services. The best practices research and insight programs provide the foundation for all of its other programs. The Company offers technology analytics programs anchored by cloud-based software applications that surface performance improvement opportunities to accelerate progress. Through its consulting services, the Company provides on-the-ground support for performance improvement initiatives, as well as best practice professional management of areas of the hospital or medical group. The Company’s data-enabled services are primarily focused in the area of enrollment management.

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