Head to Head Review: Legg Mason (LM) & Diamond Hill Investment Group (DHIL)

Legg Mason (NYSE: LM) and Diamond Hill Investment Group (NASDAQ:DHIL) are both finance companies, but which is the superior business? We will contrast the two companies based on the strength of their earnings, dividends, analyst recommendations, profitability, risk, institutional ownership and valuation.

Earnings and Valuation

This table compares Legg Mason and Diamond Hill Investment Group’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Legg Mason $2.89 billion 1.13 $227.25 million $3.64 10.62
Diamond Hill Investment Group $136.10 million 5.20 $46.05 million $15.03 13.57

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

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Legg Mason and Diamond Hill Investment Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Legg Mason 3 4 3 0 2.00
Diamond Hill Investment Group 0 0 0 0 N/A

Legg Mason currently has a consensus target price of $45.70, indicating a potential upside of 18.18%. Given Legg Mason’s higher probable upside, equities research analysts plainly believe Legg Mason is more favorable than Diamond Hill Investment Group.

Risk and Volatility

Legg Mason has a beta of 2.19, meaning that its stock price is 119% more volatile than the S&P 500. Comparatively, Diamond Hill Investment Group has a beta of 0.89, meaning that its stock price is 11% less volatile than the S&P 500.

Profitability

This table compares Legg Mason and Diamond Hill Investment Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Legg Mason 11.43% 8.21% 3.98%
Diamond Hill Investment Group 35.08% 31.76% 23.11%

Dividends

Legg Mason pays an annual dividend of $1.12 per share and has a dividend yield of 2.9%. Diamond Hill Investment Group does not pay a dividend. Legg Mason pays out 30.8% of its earnings in the form of a dividend. Diamond Hill Investment Group has raised its dividend for 8 consecutive years.

Insider & Institutional Ownership

90.7% of Legg Mason shares are owned by institutional investors. Comparatively, 61.8% of Diamond Hill Investment Group shares are owned by institutional investors. 12.7% of Legg Mason shares are owned by insiders. Comparatively, 7.3% of Diamond Hill Investment Group 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.

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.

About Diamond Hill Investment Group

Diamond Hill Investment Group, Inc. provides investment advisory and fund administration services. The Company’s subsidiaries include Diamond Hill Capital Management, Inc. (DHCM), Beacon Hill Fund Services, Inc. (BHFS) and BHIL Distributors, Inc. (BHIL). The Company’s primary objective is to fulfill its fiduciary duty to clients. The Company provides investment management and administration services to mutual funds, institutional accounts and private investment funds. DHCM is an investment advisor to the Diamond Hill Funds (the Funds), a series of open-end mutual funds, private investment funds (Private Funds), an exchange traded fund and other institutional accounts. In addition, DHCM is administrator for the Funds. BHFS provides compliance, treasury and other fund administration services to investment advisors and mutual funds. BHIL is a subsidiary of BHFS. BHIL provides underwriting services to mutual funds. BHFS and BHIL collectively operate as Beacon Hill.

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