Nelnet (NYSE:NNI) vs. Bread Financial (NYSE:BFH) Financial Analysis

Bread Financial (NYSE:BFH) and Nelnet (NYSE:NNI) are both mid-cap business services companies, but which is the better business? We will contrast the two businesses based on the strength of their risk, valuation, profitability, earnings, analyst recommendations, institutional ownership and dividends.

Earnings and Valuation

This table compares Bread Financial and Nelnet’s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bread Financial	$5.17 billion	0.40	$718.00 million	$7.94	5.25
Nelnet	$1.08 billion	3.71	$91.53 million	$3.70	29.16

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

Profitability

This table compares Bread Financial and Nelnet’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bread Financial	8.08%	14.44%	1.88%
Nelnet	6.54%	4.17%	0.81%

Volatility and Risk

Bread Financial has a beta of 1.92, suggesting that its share price is 92% more volatile than the S&P 500. Comparatively, Nelnet has a beta of 0.84, suggesting that its share price is 16% less volatile than the S&P 500.

Dividends

Bread Financial pays an annual dividend of $0.84 per share and has a dividend yield of 2.0%. Nelnet pays an annual dividend of $1.12 per share and has a dividend yield of 1.0%. Bread Financial pays out 10.6% of its earnings in the form of a dividend. Nelnet pays out 30.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Nelnet has increased its dividend for 9 consecutive years. Bread Financial is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of current recommendations for Bread Financial and Nelnet, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bread Financial	4	7	3	0	1.93
Nelnet	0	1	0	0	2.00

Bread Financial presently has a consensus target price of $39.17, indicating a potential downside of 5.96%. Nelnet has a consensus target price of $96.00, indicating a potential downside of 11.04%. Given Bread Financial’s higher probable upside, analysts plainly believe Bread Financial is more favorable than Nelnet.

Insider and Institutional Ownership

99.5% of Bread Financial shares are owned by institutional investors. Comparatively, 33.5% of Nelnet shares are owned by institutional investors. 0.6% of Bread Financial shares are owned by company insiders. Comparatively, 50.1% of Nelnet shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Summary

Bread Financial beats Nelnet on 12 of the 17 factors compared between the two stocks.

About Bread Financial

Bread Financial Holdings, Inc. provides tech-forward payment and lending solutions to customers and consumer-based industries in North America. It offers credit card and other loans financing services, including risk management solutions, account origination, and funding services for private label and co-brand credit card programs, as well as through Bread partnerships; and Comenity-branded general purpose cash-back credit. The company also manages and services the loans it originates for private label, co-brand, and general-purpose credit card programs, and installment loans and split-pay products; and provides marketing, and data and analytics services. In addition, it offers an enhanced digital suite that includes a unified software development kit, which provides access to its suite of products, as well as promotes credit payment options earlier in the shopping experience. Further, the company through Bread, a digital payments platform and robust suite of application programming interfaces allows merchants and partners to integrate online point-of-sale financing and other digital payment products. It offers its products under the Bread CashbackTM, Bread PayTM, and Bread SavingsTM brands. The company was formerly known as Alliance Data Systems Corporation and changed its name to Bread Financial Holdings, Inc. in March 2022. Bread Financial Holdings, Inc. was incorporated in 1995 and is headquartered in Columbus, Ohio.

About Nelnet

Nelnet, Inc. engages in loan servicing, communications, education technology, services, and payment processing businesses worldwide. The Loan Servicing and Systems segment provides loan conversion, application processing, borrower updates, customer service, payment processing, due diligence procedures, funds management reconciliation, and claim processing services. This segment also offers student loan servicing software; business process outsourcing services specialized in contact center management, such as inbound calls, outreach campaigns and sales, and interacting with customers through multi-channels, and processing and technology services. The Education Technology Services and Payments segment provides financial management services; school information system software; website design and cost-effective admissions software; FACTS Giving, a donation platform; and customized professional development and coaching services, educational instruction services, and technology products that aid in teacher and student evaluations. This segment also offers tuition payment plans, and service and technology for student billings, payments, and refunds; solutions for in-person, online, and mobile payment experiences on campus; payment processing services, such as credit card and electronic transfer; faith community, giving, and learning management services and technologies; and an integrated commerce payment platform, financial management, and tuition payment plan services, as well as a school management platform that provides administrative, information and financial management, and communication functions for K-12 schools. The Asset Generation and Management segment acquires, manages, and owns loan assets. The Nelnet Bank segment operates as an internet industrial bank. It also offers investment advisory, insurance, and reinsurance services, as well as engages in real estate investment business. The company was incorporated in 1977 and is headquartered in Lincoln, Nebraska.