Gamco Investors (NYSE: GBL) and Waddell & Reed Financial (NYSE:WDR) are both small-cap financials companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, valuation, dividends, analyst recommendations, risk, profitability and earnings.

Risk & Volatility

Gamco Investors has a beta of 1.06, meaning that its share price is 6% more volatile than the S&P 500. Comparatively, Waddell & Reed Financial has a beta of 2.1, meaning that its share price is 110% more volatile than the S&P 500.

Valuation & Earnings

This table compares Gamco Investors and Waddell & Reed Financial’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Gamco Investors $353.00 million 2.43 $117.12 million $3.18 9.26
Waddell & Reed Financial $1.24 billion 1.42 $146.90 million $1.40 15.07

Waddell & Reed Financial has higher revenue and earnings than Gamco Investors. Gamco Investors is trading at a lower price-to-earnings ratio than Waddell & Reed Financial, indicating that it is currently the more affordable of the two stocks.

Dividends

Gamco Investors pays an annual dividend of $0.08 per share and has a dividend yield of 0.3%. Waddell & Reed Financial pays an annual dividend of $1.84 per share and has a dividend yield of 8.7%. Gamco Investors pays out 2.5% of its earnings in the form of a dividend. Waddell & Reed Financial pays out 131.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Gamco Investors has raised its dividend for 6 consecutive years and Waddell & Reed Financial has raised its dividend for 5 consecutive years.

Profitability

This table compares Gamco Investors and Waddell & Reed Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Gamco Investors 26.81% -63.12% 45.24%
Waddell & Reed Financial 10.10% 16.81% 10.22%

Insider and Institutional Ownership

25.7% of Gamco Investors shares are held by institutional investors. Comparatively, 97.5% of Waddell & Reed Financial shares are held by institutional investors. 80.0% of Gamco Investors shares are held by insiders. Comparatively, 3.8% of Waddell & Reed Financial shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of recent ratings and target prices for Gamco Investors and Waddell & Reed Financial, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Gamco Investors 0 0 0 0 N/A
Waddell & Reed Financial 5 2 0 0 1.29

Waddell & Reed Financial has a consensus target price of $18.43, suggesting a potential downside of 12.66%. Given Waddell & Reed Financial’s higher probable upside, analysts clearly believe Waddell & Reed Financial is more favorable than Gamco Investors.

Summary

Waddell & Reed Financial beats Gamco Investors on 8 of the 15 factors compared between the two stocks.

Gamco Investors Company Profile

GAMCO Investors, Inc. is a holding company. The Company is a provider of investment advisory services to open and closed-end funds, institutional and private wealth management investors principally in the United States. The Company operates through the investment advisory and asset management business segment. It manages assets on a discretionary basis and invests in securities through various investment styles. Its assets under management are organized into three groups: Institutional and Private Wealth Management; Open and Closed-End Funds, and the GAMCO International SICAV (SICAV). The Company provides advisory services to a range of investors, including corporate retirement plans, foundations, endowments and private wealth clients, and also serves as sub-advisor to third-party investment funds, including registered investment companies. As of December 31, 2016, it had provided advisory services to 21 open-end funds, 15 closed-end funds and one exchange traded managed fund.

Waddell & Reed Financial Company Profile

Waddell & Reed Financial, Inc., incorporated on December 24, 1981, is a holding company. The Company is a mutual fund and asset management company. The Company provides investment management, investment advisory, investment product underwriting, and distribution and shareholder services administration to Waddell & Reed Advisors group of mutual funds (the Advisors Funds), Ivy Funds, Ivy Funds Variable Insurance Portfolios (Ivy Funds VIP), InvestEd Portfolios and 529 college savings plan (collectively, the Funds), and the Ivy Global Investors Fund SICAV (the SICAV) and its Ivy Global Investors sub-funds (the IGI Funds), and institutional and separately managed accounts. The Company operates its business through a distribution network. Its retail products are distributed through third parties, such as other broker-dealers, registered investment advisors and various retirement platforms or through associated independent contractor financial advisors.

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