World Acceptance (WRLD) and Stonegate Mortgage (SGM) Financial Review

World Acceptance (NASDAQ: WRLD) and Stonegate Mortgage (NYSE:SGM) are both small-cap consumer lending – nec companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, dividends, risk, analyst recommendations, institutional ownership, valuation and earnings.

Analyst Ratings

This is a breakdown of current recommendations and price targets for World Acceptance and Stonegate Mortgage, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
World Acceptance 3 0 0 0 1.00
Stonegate Mortgage 0 0 0 0 N/A

World Acceptance currently has a consensus price target of $59.00, suggesting a potential downside of 26.91%. Given World Acceptance’s higher probable upside, analysts clearly believe World Acceptance is more favorable than Stonegate Mortgage.

Earnings & Valuation

This table compares World Acceptance and Stonegate Mortgage’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
World Acceptance $531.73 million 1.35 $73.60 million $7.32 11.03
Stonegate Mortgage N/A N/A N/A $1.16 6.89

World Acceptance has higher revenue and earnings than Stonegate Mortgage. Stonegate Mortgage is trading at a lower price-to-earnings ratio than World Acceptance, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares World Acceptance and Stonegate Mortgage’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
World Acceptance 12.02% 13.90% 7.70%
Stonegate Mortgage -13.22% -6.70% -1.57%

Risk & Volatility

World Acceptance has a beta of 2.4, suggesting that its stock price is 140% more volatile than the S&P 500. Comparatively, Stonegate Mortgage has a beta of 1.45, suggesting that its stock price is 45% more volatile than the S&P 500.

Insider and Institutional Ownership

91.9% of World Acceptance shares are owned by institutional investors. Comparatively, 44.3% of Stonegate Mortgage shares are owned by institutional investors. 27.3% of World Acceptance shares are owned by insiders. Comparatively, 44.5% of Stonegate Mortgage shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Summary

World Acceptance beats Stonegate Mortgage on 9 of the 10 factors compared between the two stocks.

About World Acceptance

World Acceptance Corporation operates a small-loan consumer finance business in 15 states and Mexico as of March 31, 2016. The Company offers short-term small installment loans, medium-term larger installment loans, related credit insurance and ancillary products and services to individuals. The Company offers standardized installment loans generally between $300 and $4,000 through 1,339 branches in Alabama, Georgia, Idaho, Illinois, Indiana, Kentucky, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, South Carolina, Texas, Tennessee, Wisconsin and Mexico as of March 31, 2016. The Company generally serves individuals with limited access to other sources of consumer credit, such as banks, credit unions, other consumer finance businesses and credit card lenders. In the United States branches, the Company also offers income tax return preparation services to its loan customers and other individuals.

About Stonegate Mortgage

Stonegate Mortgage Corporation is a non-bank mortgage company. The Company is focused on originating, financing and servicing the United States residential mortgage loans. The Company’s segments include Originations, Servicing, Financing and Other. The Originations segment primarily originates and sells residential mortgage loans, which conform to the underwriting guidelines of the government sponsored enterprises and government agencies, and non-agency whole loan investors. The Servicing segment includes loan administration, collection and default activities, including the collection and remittance of loan payments, responding to customer inquiries, collection of principal and interest payments, holding custodial funds for the payment of property taxes and insurance premiums, counseling delinquent mortgagors and modifying loans. The Financing segment includes warehouse-lending activities to correspondent customers by the Company’s subsidiary, NattyMac, LLC.

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