Critical Review: Regional Management (NYSE:RM) & Bread Financial (NYSE:BFH)

Regional Management (NYSE:RM) and Bread Financial (NYSE:BFH) are both small-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their analyst recommendations, profitability, institutional ownership, risk, dividends, valuation and earnings.

Insider and Institutional Ownership

98.9% of Regional Management shares are owned by institutional investors. Comparatively, 99.5% of Bread Financial shares are owned by institutional investors. 9.8% of Regional Management shares are owned by company insiders. Comparatively, 0.3% of Bread Financial shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Volatility & Risk

Regional Management has a beta of 1.47, meaning that its share price is 47% more volatile than the S&P 500. Comparatively, Bread Financial has a beta of 1.93, meaning that its share price is 93% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Regional Management and Bread Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Regional Management	0	2	0	0	2.00
Bread Financial	4	7	2	0	1.85

Regional Management currently has a consensus price target of $29.00, indicating a potential upside of 14.44%. Bread Financial has a consensus price target of $36.00, indicating a potential downside of 0.53%. Given Regional Management’s stronger consensus rating and higher probable upside, analysts clearly believe Regional Management is more favorable than Bread Financial.

Profitability

This table compares Regional Management and Bread Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Regional Management	2.89%	8.85%	1.64%
Bread Financial	13.87%	26.24%	3.34%

Valuation & Earnings

This table compares Regional Management and Bread Financial’s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Regional Management	$483.94 million	0.51	$15.96 million	$1.64	15.45
Bread Financial	$5.17 billion	0.35	$718.00 million	$14.32	2.53

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

Dividends

Regional Management pays an annual dividend of $1.20 per share and has a dividend yield of 4.7%. Bread Financial pays an annual dividend of $0.84 per share and has a dividend yield of 2.3%. Regional Management pays out 73.2% of its earnings in the form of a dividend. Bread Financial pays out 5.9% 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.

Summary

Bread Financial beats Regional Management on 10 of the 16 factors compared between the two stocks.

About Regional Management

Regional Management Corp., a diversified consumer finance company, provides various installment loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies, and other lenders in the United States. It offers small and large installment loans; and retail loans to finance the purchase of furniture, appliances, and other retail products. The company also provides insurance products, including credit life, credit accident and health, credit property, vehicle single interest, and credit involuntary unemployment insurance; collateral protection insurance; and property insurance, as well as reinsurance products. In addition, its loans are sourced through branches, centrally-managed direct mail campaigns, and digital partners, as well as its consumer website. The company was incorporated in 1987 and is headquartered in Greer, South Carolina.

About Bread Financial

Bread Financial Holdings, Inc. provides tech-forward payment and lending solutions to customers and consumer-based industries in North America. It offers credit card and other loans financing services, including risk management solutions, account origination, and funding services for private label and co-brand credit card programs, as well as through Bread partnerships; and Comenity-branded general purpose cash-back credit. The company also manages and services the loans it originates for private label, co-brand, and general-purpose credit card programs, and installment loans and split-pay products; and provides marketing, and data and analytics services. In addition, it offers an enhanced digital suite that includes a unified software development kit, which provides access to its suite of products, as well as promotes credit payment options earlier in the shopping experience. Further, the company through Bread, a digital payments platform and robust suite of application programming interfaces allows merchants and partners to integrate online point-of-sale financing and other digital payment products. It offers its products under the Bread CashbackTM, Bread PayTM, and Bread SavingsTM brands. The company was formerly known as Alliance Data Systems Corporation and changed its name to Bread Financial Holdings, Inc. in March 2022. Bread Financial Holdings, Inc. was incorporated in 1995 and is headquartered in Columbus, Ohio.