Waddell & Reed Financial (WDR) vs. Virtu Financial (VIRT) Critical Survey

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Waddell & Reed Financial (NYSE: WDR) and Virtu Financial (NASDAQ:VIRT) are both finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their earnings, risk, valuation, institutional ownership, profitability, analyst recommendations and dividends.

Analyst Recommendations

This is a summary of current ratings for Waddell & Reed Financial and Virtu Financial, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Waddell & Reed Financial 4 3 0 0 1.43
Virtu Financial 0 5 3 0 2.38

Waddell & Reed Financial currently has a consensus target price of $20.29, suggesting a potential downside of 1.33%. Virtu Financial has a consensus target price of $29.78, suggesting a potential upside of 42.82%. Given Virtu Financial’s stronger consensus rating and higher probable upside, analysts clearly believe Virtu Financial is more favorable than Waddell & Reed Financial.

Volatility and Risk

Waddell & Reed Financial has a beta of 1.9, meaning that its stock price is 90% more volatile than the S&P 500. Comparatively, Virtu Financial has a beta of -0.86, meaning that its stock price is 186% less volatile than the S&P 500.

Institutional & Insider Ownership

98.8% of Waddell & Reed Financial shares are held by institutional investors. Comparatively, 25.9% of Virtu Financial shares are held by institutional investors. 3.4% of Waddell & Reed Financial shares are held by company insiders. Comparatively, 73.5% of Virtu Financial shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Profitability

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

Net Margins Return on Equity Return on Assets
Waddell & Reed Financial 13.47% 19.29% 12.69%
Virtu Financial 11.30% 20.33% 3.36%

Earnings & Valuation

This table compares Waddell & Reed Financial and Virtu Financial’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Waddell & Reed Financial $1.16 billion 1.42 $141.27 million $1.92 10.71
Virtu Financial $1.02 billion 3.83 $2.93 million $0.57 36.58

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

Dividends

Waddell & Reed Financial pays an annual dividend of $1.00 per share and has a dividend yield of 4.9%. Virtu Financial pays an annual dividend of $0.96 per share and has a dividend yield of 4.6%. Waddell & Reed Financial pays out 52.1% of its earnings in the form of a dividend. Virtu Financial pays out 168.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Waddell & Reed Financial is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Waddell & Reed Financial beats Virtu Financial on 9 of the 16 factors compared between the two stocks.

About Waddell & Reed Financial

Waddell & Reed Financial, Inc., through its subsidiaries, provides investment management and advisory, investment product underwriting and distribution, and shareholder services administration to mutual funds, and institutional and separately managed accounts in the United States. The company acts as an investment adviser for institutional and other private investors, and provides sub advisory services to other investment companies; and underwrites and distributes registered open-end mutual fund portfolios. It also offers fee-based asset allocation investment advisory products to advisors channel customers; distributes business partners' variable annuity products, and retirement and life insurance products to advisors channel customers; and sells life insurance and disability products underwritten by various carriers. The company distributes investment products through its wholesale channel comprising other broker/dealers, various retirement platforms, and registered investment advisors, as well as through independent financial advisors; and markets investment advisory services to institutional investors directly or through consultants. Waddell & Reed Financial, Inc. was founded in 1937 and is based in Overland Park, Kansas.

About Virtu Financial

Virtu Financial, Inc., together with its subsidiaries, provides market making and liquidity services through its proprietary, multi-asset, and multi-currency technology platform to the financial markets worldwide. The company's Market Making segment principally consists of market making in the cash, futures, and options markets across equities, options, fixed income, currencies, and commodities. Its Execution Services segment comprises agency-based trading and trading venues, which offer execution services in equities, ETFs, futures, and fixed income to institutions, banks, and broker dealers. Virtu Financial, Inc. was founded in 2008 and is headquartered in New York, New York.

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