Financial Analysis: Legg Mason (LM) versus Apollo Global Management (NYSE:APO)

Apollo Global Management (NYSE: APO) and Legg Mason (NYSE:LM) are both mid-cap financials companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, dividends, institutional ownership, earnings, analyst recommendations, valuation and risk.

Volatility and Risk

Apollo Global Management has a beta of 1.22, meaning that its share price is 22% more volatile than the S&P 500. Comparatively, Legg Mason has a beta of 2.27, meaning that its share price is 127% more volatile than the S&P 500.

Dividends

Apollo Global Management pays an annual dividend of $1.56 per share and has a dividend yield of 4.3%. Legg Mason pays an annual dividend of $1.12 per share and has a dividend yield of 2.6%. Apollo Global Management pays out 51.3% of its earnings in the form of a dividend. Legg Mason pays out 43.8% 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. Legg Mason has raised its dividend for 8 consecutive years.

Valuation & Earnings

This table compares Apollo Global Management and Legg Mason’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Apollo Global Management $1.97 billion 3.53 $402.85 million $3.04 11.81
Legg Mason $2.89 billion 1.36 $227.25 million $2.56 16.73

Apollo Global Management has higher earnings, but lower revenue than Legg Mason. Apollo Global Management is trading at a lower price-to-earnings ratio than Legg Mason, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Apollo Global Management and Legg Mason’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Apollo Global Management 24.82% 64.11% 21.48%
Legg Mason 8.46% 7.16% 3.49%

Insider and Institutional Ownership

72.4% of Apollo Global Management shares are held by institutional investors. Comparatively, 82.5% of Legg Mason shares are held by institutional investors. 4.1% of Apollo Global Management shares are held by insiders. Comparatively, 12.7% of Legg Mason shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Apollo Global Management and Legg Mason, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Apollo Global Management 0 2 9 0 2.82
Legg Mason 2 4 3 0 2.11

Apollo Global Management currently has a consensus price target of $34.45, suggesting a potential downside of 4.00%. Legg Mason has a consensus price target of $43.44, suggesting a potential upside of 1.46%. Given Legg Mason’s higher possible upside, analysts plainly believe Legg Mason is more favorable than Apollo Global Management.

Summary

Apollo Global Management beats Legg Mason on 9 of the 17 factors compared between the two stocks.

Apollo Global Management Company Profile

Apollo Global Management, LLC (Apollo) is an alternative investment manager in private equity, credit and real estate. The Company raises, invests and manages funds on behalf of pension, endowment and sovereign wealth funds, as well as other institutional and individual investors. The Company’s segments include private equity, credit and real estate. The private equity segment invests in control equity and related debt instruments, convertible securities and distressed debt investments. The credit segment invests in non-control corporate and structured debt instruments, including performing, stressed and distressed investments across the capital structure. The real estate segment invests in real estate equity for the acquisition and recapitalization of real estate assets, portfolios, platforms and operating companies, and real estate debt, including first mortgage and mezzanine loans, preferred equity and commercial mortgage backed securities.

Legg Mason Company Profile

Legg Mason, Inc. is a holding company. The Company and its subsidiaries are principally engaged in providing asset management and related financial services to individuals, institutions, corporations and municipalities. The Company operates through Global Asset Management segment. Global Asset Management provides investment advisory services to institutional and individual clients and to the Company-sponsored investment funds. The Company, through its subsidiaries, provides investment management and related services to institutional and individual clients, Company-sponsored investment funds and retail separately managed account programs. It offers its products and services directly and through various financial intermediaries. It has operations principally in the United States and the United Kingdom and also has offices in Australia, Bahamas, Brazil, Canada, Chile, China, Dubai, France, Germany, Italy, Japan, Luxembourg, Poland, Singapore, Spain, Switzerland and Taiwan.

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