Wells Fargo & Company (NYSE:WFC) vs. Raymond James Financial (NYSE:RJF) Critical Review

Raymond James Financial (NYSE:RJF) and Wells Fargo & Company (NYSE:WFC) are both large-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, dividends, valuation, analyst recommendations, institutional ownership, profitability and earnings.

Earnings and Valuation

This table compares Raymond James Financial and Wells Fargo & Company”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Raymond James Financial	$13.84 billion	2.41	$2.14 billion	$10.29	16.43
Wells Fargo & Company	$123.53 billion	2.21	$21.34 billion	$6.27	13.88

Wells Fargo & Company has higher revenue and earnings than Raymond James Financial. Wells Fargo & Company is trading at a lower price-to-earnings ratio than Raymond James Financial, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Raymond James Financial and Wells Fargo & Company’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Raymond James Financial	13.42%	18.19%	2.61%
Wells Fargo & Company	17.27%	12.90%	1.05%

Volatility & Risk

Raymond James Financial has a beta of 0.99, meaning that its stock price is 1% less volatile than the S&P 500. Comparatively, Wells Fargo & Company has a beta of 1.09, meaning that its stock price is 9% more volatile than the S&P 500.

Dividends

Raymond James Financial pays an annual dividend of $2.16 per share and has a dividend yield of 1.3%. Wells Fargo & Company pays an annual dividend of $1.80 per share and has a dividend yield of 2.1%. Raymond James Financial pays out 21.0% of its earnings in the form of a dividend. Wells Fargo & Company pays out 28.7% 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. Raymond James Financial has increased its dividend for 3 consecutive years and Wells Fargo & Company has increased its dividend for 4 consecutive years. Wells Fargo & Company is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of current recommendations for Raymond James Financial and Wells Fargo & Company, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Raymond James Financial	0	9	3	0	2.25
Wells Fargo & Company	1	9	13	0	2.52

Raymond James Financial presently has a consensus target price of $181.36, indicating a potential upside of 7.26%. Wells Fargo & Company has a consensus target price of $94.87, indicating a potential upside of 9.04%. Given Wells Fargo & Company’s stronger consensus rating and higher probable upside, analysts plainly believe Wells Fargo & Company is more favorable than Raymond James Financial.

Insider & Institutional Ownership

83.8% of Raymond James Financial shares are held by institutional investors. Comparatively, 75.9% of Wells Fargo & Company shares are held by institutional investors. 0.6% of Raymond James Financial shares are held by insiders. Comparatively, 0.1% of Wells Fargo & Company shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Summary

Wells Fargo & Company beats Raymond James Financial on 9 of the 17 factors compared between the two stocks.

About Raymond James Financial

Raymond James Financial, Inc., a financial holding company, through its subsidiaries, engages in the underwriting, distribution, trading, and brokerage of equity and debt securities, and the sale of mutual funds and other investment products in the United States, Canada, Europe, and internationally. The company operates through Private Client Group, Capital Markets, Asset Management, RJ Bank, and Other segments. The Private Client Group segment provides securities brokerage services, including the sale of equities, mutual funds, fixed income products, and insurance products to their individual clients; and borrowing and lending of securities to and from other broker-dealers, financial institutions, and other counterparties. The Capital Markets segment offers securities brokerage, trading, and research services to institutions with a focus on sale of the United States and Canadian equities and fixed income products; and manages and participates in underwritings, merger and acquisition services, and public finance activities. The Asset Management segment engages in the operations of Eagle, the Eagle Family of Funds, Cougar, the asset management operations of Raymond James & Associates, trust services of Raymond James Trust, and other fee-based asset management programs. The RJ Bank segment provides corporate loans, SBL, tax-exempt loans, and residential loans. The Other segment engages in private equity activities, including various direct and third party private equity investments; and private equity funds. Raymond James Financial, Inc. was founded in 1962 and is based in St. Petersburg, Florida.

About Wells Fargo & Company

Wells Fargo & Co. is a diversified and community-based financial services company, which engages in the provision of banking, insurance, investments, mortgage, and consumer and commercial finance products and services. It operates through the following segments: Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth and Investment Management. The Consumer Banking and Lending segment offers consumer and small business banking, home lending, credit cards, auto, and personal lending. The Commercial Banking segment provides banking and credit products across industry sectors and municipalities, secured lending and lease products, and treasury management. The Corporate and Investment Banking segment is composed of corporate banking, investment banking, treasury management, commercial real estate lending and servicing, and equity and fixed income solutions, as well as sales, trading, and research capabilities. The Wealth and Investment Management segment refers to personalized wealth management, brokerage, financial planning, lending, private banking, trust, and fiduciary products and services. The company was founded by Henry Wells and William G. Fargo on March 18, 1852 and is headquartered in San Francisco, CA.