Charles Schwab (NYSE:SCHW) versus Wells Fargo & Company (NYSE:WFC) Critical Analysis

Charles Schwab (NYSE:SCHW) and Wells Fargo & Company (NYSE:WFC) are both large-cap finance companies, but which is the better stock? We will compare the two companies based on the strength of their risk, dividends, institutional ownership, earnings, analyst recommendations, profitability and valuation.

Earnings & Valuation

This table compares Charles Schwab and Wells Fargo & Company”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Charles Schwab	$22.91 billion	7.16	$5.94 billion	$4.27	21.62
Wells Fargo & Company	$82.79 billion	3.18	$19.72 billion	$6.08	13.80

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

Dividends

Charles Schwab pays an annual dividend of $1.08 per share and has a dividend yield of 1.2%. Wells Fargo & Company pays an annual dividend of $1.80 per share and has a dividend yield of 2.1%. Charles Schwab pays out 25.3% of its earnings in the form of a dividend. Wells Fargo & Company pays out 29.6% 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. Charles Schwab has increased its dividend for 1 consecutive years and Wells Fargo & Company has increased its dividend for 4 consecutive years. Wells Fargo & Company is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of current ratings for Charles Schwab and Wells Fargo & Company, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Charles Schwab	2	5	16	1	2.67
Wells Fargo & Company	0	8	11	0	2.58

Charles Schwab currently has a consensus price target of $106.45, indicating a potential upside of 15.30%. Wells Fargo & Company has a consensus price target of $89.57, indicating a potential upside of 6.76%. Given Charles Schwab’s stronger consensus rating and higher probable upside, research analysts plainly believe Charles Schwab is more favorable than Wells Fargo & Company.

Institutional and Insider Ownership

84.4% of Charles Schwab shares are owned by institutional investors. Comparatively, 75.9% of Wells Fargo & Company shares are owned by institutional investors. 6.3% of Charles Schwab shares are owned by insiders. Comparatively, 0.1% of Wells Fargo & Company shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Charles Schwab and Wells Fargo & Company’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Charles Schwab	35.93%	21.26%	1.85%
Wells Fargo & Company	17.18%	12.51%	1.04%

Risk and Volatility

Charles Schwab has a beta of 1.02, suggesting that its share price is 2% more volatile than the S&P 500. Comparatively, Wells Fargo & Company has a beta of 1.22, suggesting that its share price is 22% more volatile than the S&P 500.

Summary

Charles Schwab beats Wells Fargo & Company on 12 of the 18 factors compared between the two stocks.

About Charles Schwab

The Charles Schwab Corporation, together with its subsidiaries, operates as a savings and loan holding company that provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services in the United States and internationally. The company operates in two segments, Investor Services and Advisor Services. It offers brokerage accounts with equity and fixed income trading, margin lending, options trading, futures and forex trading, and cash management capabilities, including certificates of deposit; third-party mutual funds through the Mutual Fund Marketplace and Mutual Fund OneSource service, as well as mutual fund trading and clearing services to broker-dealers; exchange-traded funds; advisory solutions for managed portfolios, separately managed accounts, customized personal advice for tailored portfolios, specialized planning, and full-time portfolio management; banking products comprising checking and savings accounts, first lien residential real estate mortgage loans, home equity lines of credit, and pledged asset lines; and trust custody services, personal trust reporting services, and administrative trustee services. It also provides digital retirement calculators; integrated web-, mobile-, and software-based trading platforms, real-time market data, options trading, premium research, and multi-channel access; self-service education and support tools; online research and analysis tools; equity compensation plan sponsors full-service recordkeeping for stock plans, stock options, restricted stock, performance shares, and stock appreciation rights; retirement plan services; mutual fund clearing services; and advisor services, including interactive tools and educational content. The Company operates through branch offices. The Charles Schwab Corporation was incorporated in 1971 and is headquartered in Westlake, Texas.

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.