Critical Comparison: American Capital (ACAS) & State Street Corporation (STT)

American Capital (NASDAQ: ACAS) and State Street Corporation (NYSE:STT) are both financials companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, institutional ownership, valuation, profitabiliy, risk, analyst recommendations and dividends.

Dividends

State Street Corporation pays an annual dividend of $1.52 per share and has a dividend yield of 1.6%. American Capital does not pay a dividend. State Street Corporation pays out 28.5% of its earnings in the form of a dividend. American Capital has raised its dividend for 6 consecutive years.

Volatility and Risk

American Capital has a beta of 1, suggesting that its share price has a similar volatility profile to the S&P 500.Comparatively, State Street Corporation has a beta of 1.29, suggesting that its share price is 29% more volatile than the S&P 500.

Valuation & Earnings

This table compares American Capital and State Street Corporation’s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	EBITDA	Earnings Per Share	Price/Earnings Ratio
American Capital	N/A	N/A	N/A	($0.12)	-149.90
State Street Corporation	$10.39 billion	3.35	$2.01 billion	$5.34	17.33

State Street Corporation has higher revenue and earnings than American Capital. American Capital is trading at a lower price-to-earnings ratio than State Street Corporation, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of recent recommendations for American Capital and State Street Corporation, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
American Capital	0	1	0	0	2.00
State Street Corporation	2	9	2	1	2.14

American Capital currently has a consensus price target of $17.50, indicating a potential downside of 2.72%. State Street Corporation has a consensus price target of $87.46, indicating a potential downside of 5.51%. Given American Capital’s higher possible upside, equities research analysts clearly believe American Capital is more favorable than State Street Corporation.

Profitability

This table compares American Capital and State Street Corporation’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
American Capital	150.00%	12.58%	11.27%
State Street Corporation	20.54%	12.38%	0.92%

Insider & Institutional Ownership

65.7% of American Capital shares are held by institutional investors. Comparatively, 88.0% of State Street Corporation shares are held by institutional investors. 9.2% of American Capital shares are held by company insiders. Comparatively, 0.6% of State Street Corporation shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Summary

State Street Corporation beats American Capital on 8 of the 15 factors compared between the two stocks.

American Capital Company Profile

Acas LLC., formerly American Capital, Ltd. (American Capital) is a global asset manager and private equity firm. American Capital, both directly and through its asset management business, originates, underwrites and manages investments in middle market private equity, leveraged finance, real estate, energy and structured products. It primarily invests in senior and mezzanine debt and equity in buyouts of private companies sponsored by the Company (American Capital One Stop Buyouts) or sponsored by other private equity funds and provide capital directly to early-stage and mature private and small public companies (Sponsor Finance and Other Investments). It also invests in first and second lien floating rate loans to the United States-based companies (Senior Floating Rate Loans or SFRL) and structured finance investments (Structured Products), including collateralized loan obligation (CLO) securities and commercial mortgages, and commercial mortgage backed securities (CMBS).

State Street Corporation Company Profile

State Street Corporation is a financial holding company. The Company operates through two lines of business: Investment Servicing and Investment Management. The Company, through its subsidiary, State Street Bank and Trust Company (State Street Bank), provides a range of financial products and services to institutional investors across the world. Investment servicing line of business performs functions, such as providing institutional investors with clearing, settlement and payment services. The Company operates investment management line of business through State Street Global Advisors (SSGA). SSGA provides a range of investment management, investment research and investment advisory services to corporations, public funds and other investors. Its clients include mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and investment managers.