Critical Analysis: SWK (NASDAQ:SWKH) & Synchrony Financial (NYSE:SYF)

SWK (NASDAQ:SWKH) and Synchrony Financial (NYSE:SYF) are both finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their institutional ownership, profitability, dividends, valuation, earnings, risk and analyst recommendations.

Insider and Institutional Ownership

99.3% of SWK shares are owned by institutional investors. Comparatively, 96.5% of Synchrony Financial shares are owned by institutional investors. 1.3% of SWK shares are owned by insiders. Comparatively, 0.3% of Synchrony Financial shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current recommendations for SWK and Synchrony Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
SWK	0	0	1	0	3.00
Synchrony Financial	0	8	12	0	2.60

SWK currently has a consensus price target of $18.00, suggesting a potential upside of 24.22%. Synchrony Financial has a consensus price target of $73.79, suggesting a potential downside of 2.17%. Given SWK’s stronger consensus rating and higher probable upside, research analysts plainly believe SWK is more favorable than Synchrony Financial.

Risk & Volatility

SWK has a beta of 0.16, suggesting that its share price is 84% less volatile than the S&P 500. Comparatively, Synchrony Financial has a beta of 1.49, suggesting that its share price is 49% more volatile than the S&P 500.

Earnings and Valuation

This table compares SWK and Synchrony Financial”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
SWK	$44.99 million	3.91	$13.49 million	$1.42	10.20
Synchrony Financial	$22.65 billion	1.24	$3.50 billion	$8.24	9.15

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

Profitability

This table compares SWK and Synchrony Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
SWK	39.00%	8.43%	7.38%
Synchrony Financial	14.43%	21.34%	2.71%

Summary

SWK beats Synchrony Financial on 8 of the 14 factors compared between the two stocks.

About SWK

SWK Holdings Corporation, offers specialty finance and asset management services in the United States. It operates in two segments, Finance Receivables and Pharmaceutical Development. The Finance Receivables segment provides customized financing solutions to a range of life science companies, including companies in the biotechnology, medical device, medical diagnostics and related tools, animal health, and pharmaceutical industries, as well as institutions and inventors. This segment also offers non-discretionary investment advisory services to institutional clients in separately managed accounts to invest in life science finance. The Pharmaceutical Development segment provides customers pharmaceutical development, formulation, and manufacturing services, as well as formulation solutions built around its proprietary oral drug delivery technologies, the Peptelligence platform. It also offers intellectual property licensing business. The company was formerly known as Kana Software, Inc. and changed its name to SWK Holdings Corporation in December 2009. SWK Holdings Corporation was incorporated in 1996 and is headquartered in Dallas, Texas.

About Synchrony Financial

Synchrony Financial, together with its subsidiaries, operates as a consumer financial services company in the United States. It provides credit products, such as credit cards, commercial credit products, and consumer installment loans. The company also offers private label credit cards, dual co-brand and general purpose credit cards, short- and long-term installment loans, and consumer banking products; and deposit products, including certificates of deposit, individual retirement accounts, money market accounts, and savings accounts, and sweep and affinity deposits, as well as accepts deposits through third-party securities brokerage firms. In addition, it provides debt cancellation products to its credit card customers through online, mobile, and direct mail; and healthcare payments and financing solutions under the CareCredit and Walgreens brands; payments and financing solutions in the apparel, specialty retail, outdoor, music, and luxury industries, such as American Eagle, Dick's Sporting Goods, Guitar Center, Kawasaki, Pandora, Polaris, Suzuki, and Sweetwater. The company offers its credit products through programs established with a group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations, and healthcare service providers; and deposit products through various channels, such as digital and print. It serves digital, health and wellness, retail, home, auto, telecommunications, jewelry, pets, and other industries. The company was founded in 1932 and is headquartered in Stamford, Connecticut.