Critical Review: B. Riley Financial (RILY) & General Finance (GFN)

B. Riley Financial (NASDAQ: RILY) and General Finance (NASDAQ:GFN) are both small-cap business services companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, valuation, earnings, dividends, risk, analyst recommendations and institutional ownership.

Dividends

B. Riley Financial pays an annual dividend of $0.32 per share and has a dividend yield of 1.7%. General Finance does not pay a dividend. B. Riley Financial pays out 21.2% of its earnings in the form of a dividend.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for B. Riley Financial and General Finance, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
B. Riley Financial 0 0 0 0 N/A
General Finance 0 1 2 0 2.67

General Finance has a consensus target price of $9.20, suggesting a potential upside of 23.49%. Given General Finance’s higher possible upside, analysts clearly believe General Finance is more favorable than B. Riley Financial.

Earnings & Valuation

This table compares B. Riley Financial and General Finance’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
B. Riley Financial $190.35 million 2.62 $21.52 million $1.51 12.48
General Finance $276.93 million 0.72 -$2.96 million ($0.11) -67.73

B. Riley Financial has higher earnings, but lower revenue than General Finance. General Finance is trading at a lower price-to-earnings ratio than B. Riley Financial, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

45.9% of B. Riley Financial shares are owned by institutional investors. Comparatively, 27.2% of General Finance shares are owned by institutional investors. 30.9% of B. Riley Financial shares are owned by company insiders. Comparatively, 25.9% of General Finance shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares B. Riley Financial and General Finance’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
B. Riley Financial 9.87% 17.98% 4.82%
General Finance 0.18% 0.39% 0.08%

Volatility and Risk

B. Riley Financial has a beta of 0.95, suggesting that its stock price is 5% less volatile than the S&P 500. Comparatively, General Finance has a beta of 1.19, suggesting that its stock price is 19% more volatile than the S&P 500.

Summary

B. Riley Financial beats General Finance on 10 of the 15 factors compared between the two stocks.

About B. Riley Financial

B. Riley Financial, Inc. is an independent investment bank. The Company’s segments include capital markets, auction and liquidation, valuation and appraisal, and Principal Investments-United Online. The capital markets segment provides an array of investment banking, corporate finance, research, wealth management, sales and trading services to corporate, institutional and high net worth clients. The auction and liquidation segment utilizes a scalable network of independent contractors and industry-specific advisors to tailor its services to the needs of a multitude of clients, logistical challenges and distressed circumstances. The valuation and appraisal segment provides valuation and appraisal services to financial institutions, lenders, private equity firms and other providers of capital. The principal investments-United Online segment consists of businesses, which has been acquired primarily for attractive investment return characteristics.

About General Finance

General Finance Corporation is a specialty rental services company. The Company offers a range of portable storage units, including its core 20-feet and 40-feet steel containers, office container, mobile office and modular space products and steel tanks. It has two geographic areas that include its four operating segments: the Asia-Pacific area, consisting of the leasing operations of Royal Wolf Holdings Limited and its Australian and New Zealand subsidiaries (Royal Wolf), and North America, consisting of the combined leasing operations of Pac-Van, Inc. and its Canadian subsidiary, PV Acquisition Corp. (Pac-Van) and Lone Star Tank Rental Inc. (Lone Star), and the manufacturing operations of GFN Manufacturing Corporation and its subsidiary, Southern Frac, LLC (Southern Frac). As of June 30, 2016, the Company provided its storage solutions to over 41,000 customers across a range of industries, including commercial, construction, retail, transportation, education and others.

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