Safeguard Scientifics (NYSE: SFE) and Legg Mason (NYSE:LM) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, profitability, analyst recommendations, valuation, institutional ownership, dividends and risk.

Risk and Volatility

Safeguard Scientifics has a beta of 1.36, indicating that its share price is 36% more volatile than the S&P 500. Comparatively, Legg Mason has a beta of 2.27, indicating that its share price is 127% more volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
Safeguard Scientifics N/A -68.35% -43.20%
Legg Mason 8.46% 7.15% 3.49%

Dividends

Legg Mason pays an annual dividend of $1.12 per share and has a dividend yield of 2.9%. Safeguard Scientifics does not pay a dividend. Legg Mason pays out 43.8% of its earnings in the form of a dividend. Safeguard Scientifics has raised its dividend for 7 consecutive years.

Earnings & Valuation

This table compares Safeguard Scientifics and Legg Mason’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Safeguard Scientifics N/A N/A -$22.26 million ($4.49) -3.15
Legg Mason $2.89 billion 1.25 $227.25 million $2.56 15.11

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

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Safeguard Scientifics and Legg Mason, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Safeguard Scientifics 0 0 0 0 N/A
Legg Mason 3 2 5 0 2.20

Legg Mason has a consensus price target of $43.11, indicating a potential upside of 11.43%. Given Legg Mason’s higher probable upside, analysts clearly believe Legg Mason is more favorable than Safeguard Scientifics.

Insider & Institutional Ownership

77.6% of Safeguard Scientifics shares are held by institutional investors. Comparatively, 83.2% of Legg Mason shares are held by institutional investors. 2.7% of Safeguard Scientifics shares are held by company insiders. Comparatively, 12.7% of Legg Mason shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Summary

Legg Mason beats Safeguard Scientifics on 12 of the 14 factors compared between the two stocks.

About Safeguard Scientifics

Safeguard Scientifics, Inc. is engaged in providing capital to technology companies within the fields of healthcare, financial services and digital media. The Company holds interest in companies, which it refers to as partner companies. As of December 31, 2016, the Company held interests in 29 non-consolidated partner companies. The Company offers operational and management support to each of its partner companies. In addition to management and operational support, the Company offers ongoing planning and development assessment. It provides mentoring, advice and guidance to develop partner company management. The Company serves on the boards of directors of its partner companies, working with them to develop and implement strategic and operating plans. It measures and monitors achievement of these plans through regular review of operational and financial performance measurements.

About Legg Mason

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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