Leucadia National Corporation (NYSE:LUK) and BGC Partners, Inc. (NYSE:BGCP) are both Financial companies that recently hit new low. Naturally, this has caught the attention of the investment community. But which is the better investment? To answer this question, we will compare the two companies across various metrics including growth, profitability, risk, return, dividends, and valuation.
Leucadia National Corporation (NYSE:LUK) operates in the Investment Brokerage – National segment of the Financial sector. The company has grown sales at a 49.30% annual rate over the past five years, putting it in the high growth category. LUK has a net profit margin of 6.00% and is more profitable than the average company in the Investment Brokerage – National industry. In terms of efficiency, LUK has an asset turnover ratio of 0.26. This figure represents the amount of revenue a company generates per dollar of assets. LUK’s financial leverage ratio is 3.49, which indicates that the company’s asset base is primarily funded by debt. Company’s return on equity, which is really just the product of the company’s profit margin, asset turnover, and financial leverage ratios, is 6.90%, which is better than the Investment Brokerage – National industry average ROE.
Leucadia National Corporation (LUK) pays out an annual dividend of 0.40 per share. At the current valuation, this equates to a dividend yield of 1.54%. The company has a payout ratio of 14.80%. LUK’s current dividend therefore should be sustainable. Stock’s free cash flow yield, which represents the amount of cash available to investors before dividends, expressed as a percentage of the stock price, is 17.71. All else equal, companies with higher FCF yields are viewed as cheaper. Company trades at a P/E ratio of 16.79, and is more expensive than the average stock in the Investment Brokerage – National industry. The average investment recommendation for LUK, taken from a group of Wall Street Analysts, is 1.00, or a strong buy.
Over the past three months, Leucadia National Corporation insiders have been net sellers, acquiring a net of 47,999 shares. This implies that insiders have been feeling relatively bullish about the outlook for LUK. Insider activity and sentiment signals are important to monitor because they can shed light on how “risky” a stock is perceived to be at it’s current valuation. Knowing this, it makes sense to look at beta, a measure of market risk. LUK has a beta of 1.30 and therefore an above average level of market volatility.
BGC Partners, Inc. (NASDAQ:BGCP) operates in the Investment Brokerage – National segment of the Financial sector. BGCP has increased sales at a 12.20% CAGR over the past five years, and is considered a high growth stock. The company has a net profit margin of 6.40% and is more profitable than the average Investment Brokerage – National player. BGCP’s asset turnover ratio is 0.54 and the company has financial leverage of 7.23. BGCP’s return on equity of 21.40% is better than the Investment Brokerage – National industry average.
BGC Partners, Inc. (BGCP) pays a dividend of 0.72, which translates to dividend yield of 4.36% based on the current price. Stock has a payout ratio of 103.10%. According to this ratio, BGCP should be able to continue making payouts at these levels. The company trades at a free cash flow yield of 5.35 and has a P/E of 26.37. Compared to the average company in the 21.41 space, BGCP is relatively expensive. The average analyst recommendation for BGCP is 2.00, or a buy.
BGC Partners, Inc. insiders have sold a net of -866,202 shares during the past three months, which implies that the company’s top executives have been feeling bearish about the stock’s outlook. Finally, BGCP’s beta of 1.25 indicates that the stock has an above average level of market risk.
Leucadia National Corporation (NYSE:LUK) scores higher than BGC Partners, Inc. (NASDAQ:BGCP) on 7 of the 13 measures compared between the two companies. LUK has the better fundamentals, scoring higher on growth and leverage metrics. LUK wins on valuation measures. LUK has better insider activity and sentiment signals.