Wells Fargo & Company (NYSE:WFC) & Diamond Hill Investment Group (NASDAQ:DHIL) Critical Review

Wells Fargo & Company (NYSE:WFC) and Diamond Hill Investment Group (NASDAQ:DHIL) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their earnings, risk, dividends, institutional ownership, profitability, valuation and analyst recommendations.

Profitability

This table compares Wells Fargo & Company and Diamond Hill Investment Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Wells Fargo & Company	17.18%	12.51%	1.04%
Diamond Hill Investment Group	31.71%	21.38%	14.72%

Insider and Institutional Ownership

75.9% of Wells Fargo & Company shares are owned by institutional investors. Comparatively, 65.5% of Diamond Hill Investment Group shares are owned by institutional investors. 0.1% of Wells Fargo & Company shares are owned by insiders. Comparatively, 4.6% of Diamond Hill Investment Group shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares Wells Fargo & Company and Diamond Hill Investment Group”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Wells Fargo & Company	$82.79 billion	3.22	$19.72 billion	$6.08	13.69
Diamond Hill Investment Group	$151.10 million	2.44	$43.18 million	$17.58	7.67

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

Analyst Ratings

This is a summary of recent ratings and price targets for Wells Fargo & Company and Diamond Hill Investment Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Wells Fargo & Company	0	8	9	0	2.53
Diamond Hill Investment Group	0	1	0	0	2.00

Wells Fargo & Company currently has a consensus price target of $89.57, indicating a potential upside of 7.58%. Given Wells Fargo & Company’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Wells Fargo & Company is more favorable than Diamond Hill Investment Group.

Dividends

Wells Fargo & Company pays an annual dividend of $1.80 per share and has a dividend yield of 2.2%. Diamond Hill Investment Group pays an annual dividend of $6.00 per share and has a dividend yield of 4.4%. Wells Fargo & Company pays out 29.6% of its earnings in the form of a dividend. Diamond Hill Investment Group pays out 34.1% 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. Wells Fargo & Company has increased its dividend for 4 consecutive years.

Volatility and Risk

Wells Fargo & Company has a beta of 1.25, meaning that its share price is 25% more volatile than the S&P 500. Comparatively, Diamond Hill Investment Group has a beta of 0.81, meaning that its share price is 19% less volatile than the S&P 500.

Summary

Wells Fargo & Company beats Diamond Hill Investment Group on 11 of the 17 factors compared between the two stocks.

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.

About Diamond Hill Investment Group

Diamond Hill Investment Group, Inc., through its subsidiary, Diamond Hill Capital Management, Inc., provides investment advisory and fund administration services in the United States. It offers investment advisory and related services to clients through pooled vehicles, such as private fund; separately managed accounts; collective investment trusts; and other pooled vehicles, including sub-advised funds and model delivery programs. The company also provides fund administration services comprising portfolio and regulatory compliance, treasury and financial oversight, and general business management and governance of the funds, as well as oversight of back-office service providers, which include the custodian, fund accountant, and transfer agent. Diamond Hill Investment Group, Inc. was incorporated in 1990 and is based in Columbus, Ohio.