American Express (NYSE:AXP) and Capital One Financial (NYSE:COF) are both large-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their dividends, valuation, risk, profitability, analyst recommendations, earnings and institutional ownership.
Profitability
This table compares American Express and Capital One Financial's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| American Express | 8.84% | 21.31% | 2.44% |
| Capital One Financial | 4.08% | 3.05% | 0.43% |
Dividends
American Express pays an annual dividend of $1.72 per share and has a dividend yield of 1.3%. Capital One Financial pays an annual dividend of $1.60 per share and has a dividend yield of 1.3%. American Express pays out 21.0% of its earnings in the form of a dividend. Capital One Financial pays out 13.2% 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. American Express has increased its dividend for 1 consecutive years and Capital One Financial has increased its dividend for 1 consecutive years. Capital One Financial is clearly the better dividend stock, given its higher yield and lower payout ratio.
Earnings and Valuation
This table compares American Express and Capital One Financial's revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| American Express | $43.56 billion | 2.52 | $6.76 billion | $8.20 | 16.63 |
| Capital One Financial | $33.77 billion | 1.63 | $5.55 billion | $12.09 | 9.95 |
American Express has higher revenue and earnings than Capital One Financial. Capital One Financial is trading at a lower price-to-earnings ratio than American Express, indicating that it is currently the more affordable of the two stocks.
Risk and Volatility
American Express has a beta of 1.36, indicating that its share price is 36% more volatile than the S&P 500. Comparatively, Capital One Financial has a beta of 1.72, indicating that its share price is 72% more volatile than the S&P 500.
Institutional and Insider Ownership
83.5% of American Express shares are owned by institutional investors. Comparatively, 89.6% of Capital One Financial shares are owned by institutional investors. 0.2% of American Express shares are owned by company insiders. Comparatively, 1.5% of Capital One Financial shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.
Analyst Ratings
This is a breakdown of current ratings and recommmendations for American Express and Capital One Financial, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| American Express | 2 | 12 | 12 | 0 | 2.38 |
| Capital One Financial | 0 | 2 | 16 | 0 | 2.89 |
American Express currently has a consensus price target of $119.20, indicating a potential downside of 12.83%. Capital One Financial has a consensus price target of $114.6875, indicating a potential downside of 4.55%. Given Capital One Financial's stronger consensus rating and higher possible upside, analysts plainly believe Capital One Financial is more favorable than American Express.
Summary
Capital One Financial beats American Express on 10 of the 16 factors compared between the two stocks.
