Broadridge Financial Solutions (NYSE:BR) and CDK Global (NASDAQ:CDK) are both business services companies, but which is the superior stock? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, dividends, risk, profitability, earnings and institutional ownership.
Institutional and Insider Ownership
85.2% of Broadridge Financial Solutions shares are held by institutional investors. Comparatively, 82.4% of CDK Global shares are held by institutional investors. 2.2% of Broadridge Financial Solutions shares are held by insiders. Comparatively, 0.4% of CDK Global shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.
Dividends
Broadridge Financial Solutions pays an annual dividend of $2.16 per share and has a dividend yield of 1.7%. CDK Global pays an annual dividend of $0.60 per share and has a dividend yield of 1.4%. Broadridge Financial Solutions pays out 46.4% of its earnings in the form of a dividend. CDK Global pays out 19.1% 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. Broadridge Financial Solutions has raised its dividend for 12 consecutive years and CDK Global has raised its dividend for 4 consecutive years. Broadridge Financial Solutions is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Profitability
This table compares Broadridge Financial Solutions and CDK Global's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| Broadridge Financial Solutions | 9.50% | 46.99% | 12.42% |
| CDK Global | 0.35% | -59.38% | 13.08% |
Analyst Recommendations
This is a breakdown of recent ratings and target prices for Broadridge Financial Solutions and CDK Global, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| Broadridge Financial Solutions | 0 | 1 | 4 | 0 | 2.80 |
| CDK Global | 0 | 0 | 4 | 0 | 3.00 |
Broadridge Financial Solutions presently has a consensus target price of $133.60, suggesting a potential upside of 3.82%. CDK Global has a consensus target price of $55.00, suggesting a potential upside of 31.70%. Given CDK Global's stronger consensus rating and higher probable upside, analysts clearly believe CDK Global is more favorable than Broadridge Financial Solutions.
Volatility and Risk
Broadridge Financial Solutions has a beta of 0.88, indicating that its stock price is 12% less volatile than the S&P 500. Comparatively, CDK Global has a beta of 1.33, indicating that its stock price is 33% more volatile than the S&P 500.
Valuation and Earnings
This table compares Broadridge Financial Solutions and CDK Global's revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| Broadridge Financial Solutions | $4.36 billion | 3.39 | $482.10 million | $4.66 | 27.62 |
| CDK Global | $1.91 billion | 2.65 | $124 million | $3.14 | 13.30 |
Broadridge Financial Solutions has higher revenue and earnings than CDK Global. CDK Global is trading at a lower price-to-earnings ratio than Broadridge Financial Solutions, indicating that it is currently the more affordable of the two stocks.
Summary
Broadridge Financial Solutions beats CDK Global on 10 of the 16 factors compared between the two stocks.
