Critical Contrast: XP (NASDAQ:XP) versus Synchrony Financial (NYSE:SYF)

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

Valuation and Earnings

This table compares XP and Synchrony Financial”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
XP	$3.30 billion	3.13	$925.91 million	$1.73	11.08
Synchrony Financial	$22.60 billion	1.09	$3.55 billion	$9.67	7.56

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

Insider and Institutional Ownership

59.2% of XP shares are owned by institutional investors. Comparatively, 96.5% of Synchrony Financial shares are owned by institutional investors. 0.3% of Synchrony Financial shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
XP	27.51%	23.08%	1.37%
Synchrony Financial	15.80%	23.41%	3.05%

Analyst Ratings

This is a summary of current ratings for XP and Synchrony Financial, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
XP	0	4	5	0	2.56
Synchrony Financial	0	7	12	1	2.70

XP presently has a consensus target price of $22.86, indicating a potential upside of 19.23%. Synchrony Financial has a consensus target price of $86.32, indicating a potential upside of 18.06%. Given XP’s higher possible upside, equities research analysts clearly believe XP is more favorable than Synchrony Financial.

Dividends

XP pays an annual dividend of $0.18 per share and has a dividend yield of 0.9%. Synchrony Financial pays an annual dividend of $1.20 per share and has a dividend yield of 1.6%. XP pays out 10.4% of its earnings in the form of a dividend. Synchrony Financial pays out 12.4% 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. Synchrony Financial has increased its dividend for 4 consecutive years. Synchrony Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk and Volatility

XP has a beta of 1.17, suggesting that its stock price is 17% more volatile than the S&P 500. Comparatively, Synchrony Financial has a beta of 1.37, suggesting that its stock price is 37% more volatile than the S&P 500.

Summary

Synchrony Financial beats XP on 13 of the 18 factors compared between the two stocks.

About XP

XP Inc. provides financial products and services in Brazil. It offers securities brokerage, private pension plans, commercial, and investment banking products, such as loan operations and transactions in the foreign exchange markets and deposits; product structuring and capital markets services for corporate clients and issuers of fixed income products; advisory services for mass-affluent and institutional clients; and wealth management services for high-net-worth customers and institutional clients. The company also offers XP Educação, an online financial education portal that offers seminars, classes, and learning tools to help teach individuals on topics, such as basics of investing, techniques, and investment strategies, as well as insurance brokerage services. In addition, it operates XP Platform, an open product platform that provides clients to access investment products in the market, including equity and fixed income securities, mutual and hedge funds, structured products, life insurance, pension plans, real-estate investment funds, and others. The company was founded in 2001 and is based in São Paulo, Brazil.

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.