Financial Review: Nelnet (NNI) vs. Ritchie Bros. Auctioneers (RBA)

Nelnet (NYSE: NNI) and Ritchie Bros. Auctioneers (NYSE:RBA) are both mid-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their earnings, dividends, risk, institutional ownership, profitability, analyst recommendations and valuation.

Earnings and Valuation

This table compares Nelnet and Ritchie Bros. Auctioneers’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Nelnet $1.24 billion 1.60 $256.75 million $5.29 9.18
Ritchie Bros. Auctioneers $566.40 million 5.71 $91.83 million $0.61 49.51

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

Volatility and Risk

Nelnet has a beta of 0.96, suggesting that its share price is 4% less volatile than the S&P 500. Comparatively, Ritchie Bros. Auctioneers has a beta of 0.66, suggesting that its share price is 34% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent recommendations and price targets for Nelnet and Ritchie Bros. Auctioneers, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Nelnet 0 1 1 0 2.50
Ritchie Bros. Auctioneers 2 5 5 0 2.25

Nelnet presently has a consensus target price of $53.50, suggesting a potential upside of 10.17%. Ritchie Bros. Auctioneers has a consensus target price of $31.39, suggesting a potential upside of 3.94%. Given Nelnet’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Nelnet is more favorable than Ritchie Bros. Auctioneers.

Profitability

This table compares Nelnet and Ritchie Bros. Auctioneers’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Nelnet 17.51% 8.70% 0.71%
Ritchie Bros. Auctioneers 11.43% 13.04% 4.87%

Dividends

Nelnet pays an annual dividend of $0.64 per share and has a dividend yield of 1.3%. Ritchie Bros. Auctioneers pays an annual dividend of $0.68 per share and has a dividend yield of 2.3%. Nelnet pays out 12.1% of its earnings in the form of a dividend. Ritchie Bros. Auctioneers pays out 111.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Nelnet has raised its dividend for 2 consecutive years and Ritchie Bros. Auctioneers has raised its dividend for 15 consecutive years. Ritchie Bros. Auctioneers is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

39.9% of Nelnet shares are held by institutional investors. Comparatively, 97.9% of Ritchie Bros. Auctioneers shares are held by institutional investors. 46.1% of Nelnet shares are held by insiders. Comparatively, 0.4% of Ritchie Bros. Auctioneers shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Summary

Nelnet beats Ritchie Bros. Auctioneers on 9 of the 17 factors compared between the two stocks.

About Nelnet

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.

About Ritchie Bros. Auctioneers

Ritchie Bros Auctioneers Inc is a Canada-based holding company. The Company is an industrial auctioneer and used equipment distributor, selling used equipment and other assets. Its segments include Core Auction, which is a network of auction locations that conduct live, unreserved auctions with both on-site and online bidding, and Other, which includes its EquipmentOne and Mascus International Holding B.V. (Mascus) online services. EquipmentOne is an online marketplace that equipment sellers can navigate independently. EquipmentOne facilitates the completion of sales through a settlement process managed by EquipmentOne that protects both the seller and the buyer. Mascus is an online equipment listing service for used heavy machinery and trucks. It offers subscriptions to equipment dealers, brokers, exporters and equipment manufacturers to list equipment available for sale at a listed price. The Company, through Mascus, provides online advertising services, business tools and solutions.

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