Analyzing Aaron’s (NYSE:PRG) and Ally Financial (NYSE:ALLY)

Aaron’s (NYSE:PRG) and Ally Financial (NYSE:ALLY) are both finance companies, but which is the superior investment? We will compare the two companies based on the strength of their analyst recommendations, profitability, risk, valuation, earnings, institutional ownership and dividends.

Volatility & Risk

Aaron’s has a beta of 1.75, suggesting that its stock price is 75% more volatile than the S&P 500. Comparatively, Ally Financial has a beta of 1.16, suggesting that its stock price is 16% more volatile than the S&P 500.

Profitability

This table compares Aaron’s and Ally Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Aaron’s	8.53%	22.54%	9.98%
Ally Financial	7.64%	9.48%	0.59%

Dividends

Aaron’s pays an annual dividend of $0.52 per share and has a dividend yield of 1.5%. Ally Financial pays an annual dividend of $1.20 per share and has a dividend yield of 3.0%. Aaron’s pays out 10.3% of its earnings in the form of a dividend. Ally Financial pays out 77.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Aaron’s has increased its dividend for 2 consecutive years.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Aaron’s and Ally Financial, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Aaron’s	1	1	4	1	2.71
Ally Financial	1	7	9	0	2.47

Aaron’s presently has a consensus price target of $41.00, suggesting a potential upside of 18.02%. Ally Financial has a consensus price target of $42.80, suggesting a potential upside of 5.46%. Given Aaron’s’ stronger consensus rating and higher possible upside, equities research analysts clearly believe Aaron’s is more favorable than Ally Financial.

Earnings and Valuation

This table compares Aaron’s and Ally Financial”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Aaron’s	$2.46 billion	0.56	$197.25 million	$5.06	6.87
Ally Financial	$8.18 billion	1.53	$668.00 million	$1.54	26.35

Ally Financial has higher revenue and earnings than Aaron’s. Aaron’s is trading at a lower price-to-earnings ratio than Ally Financial, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

97.9% of Aaron’s shares are owned by institutional investors. Comparatively, 88.8% of Ally Financial shares are owned by institutional investors. 3.2% of Aaron’s shares are owned by insiders. Comparatively, 0.7% of Ally Financial shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

Aaron’s beats Ally Financial on 12 of the 18 factors compared between the two stocks.

About Aaron’s

PROG Holdings, Inc. (NYSE:PRG) is a financial technology holding company based in Salt Lake City, Utah with three business segments: Progressive Leasing, which offers lease-to-own transactions primarily to credit-challenged consumers through e-commerce and point-of-sale retail partners, via online, mobile, and in-store solutions; Vive Financial, which provides consumers who may not qualify for traditional prime lending with a variety of second-look, revolving credit products through private label and branded credit cards; and Four Technologies, which provides consumers of all credit backgrounds Buy Now, Pay Later (BNPL) options through four interest-free installments via its platform, Four.

About Ally Financial

Ally Financial Inc., a digital financial-services company, provides various digital financial products and services in the United States, Canada, and Bermuda. The company operates through Automotive Finance Operations, Insurance Operations, Mortgage Finance Operations, and Corporate Finance Operations segments. The Automotive Finance Operations segment offers automotive financing services, including providing retail installment sales contracts, loans and operating leases, term loans to dealers, financing dealer floorplans and other lines of credit to dealers, warehouse lines to automotive retailers, and fleet financing. It also provides financing services to companies and municipalities for the purchase or lease of vehicles, and vehicle-remarketing services. The Insurance Operations segment offers consumer finance protection and insurance products through the automotive dealer channel, and commercial insurance products directly to dealers. This segment provides vehicle service and maintenance contract, and guaranteed asset protection products; and underwrites commercial insurance coverages, which primarily insure dealers’ vehicle inventory. The Mortgage Finance Operations segment manages consumer mortgage loan portfolio that includes bulk purchases of jumbo and low-to-moderate income mortgage loans originated by third parties, as well as direct-to-consumer mortgage offerings. The Corporate Finance Operations segment provides senior secured leveraged cash flow and asset-based loans to middle market companies; leveraged loans; and commercial real estate product to serve companies in the nursing facilities, senior housing, and medical office buildings. It also offers commercial banking products and services. In addition, it provides securities brokerage and investment advisory services. The company was formerly known as GMAC Inc. and changed its name to Ally Financial Inc. in May 2010. Ally Financial Inc. was founded in 1919 and is based in Detroit, Michigan.