Critical Analysis: LendingTree (NASDAQ:TREE) and SLM (NASDAQ:SLM)

SLM (NASDAQ:SLM) and LendingTree (NASDAQ:TREE) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, dividends, profitability, risk, valuation, earnings and analyst recommendations.

Profitability

This table compares SLM and LendingTree’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
SLM	26.09%	33.81%	2.51%
LendingTree	14.33%	14.57%	4.49%

Analyst Recommendations

This is a summary of recent ratings for SLM and LendingTree, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
SLM	1	6	5	0	2.33
LendingTree	0	2	5	0	2.71

SLM currently has a consensus price target of $29.80, indicating a potential upside of 14.49%. LendingTree has a consensus price target of $61.33, indicating a potential upside of 128.17%. Given LendingTree’s stronger consensus rating and higher possible upside, analysts clearly believe LendingTree is more favorable than SLM.

Insider and Institutional Ownership

98.9% of SLM shares are owned by institutional investors. Comparatively, 68.3% of LendingTree shares are owned by institutional investors. 1.4% of SLM shares are owned by company insiders. Comparatively, 4.0% of LendingTree shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Risk and Volatility

SLM has a beta of 0.96, meaning that its stock price is 4% less volatile than the S&P 500. Comparatively, LendingTree has a beta of 2.05, meaning that its stock price is 105% more volatile than the S&P 500.

Earnings and Valuation

This table compares SLM and LendingTree”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
SLM	$2.63 billion	1.86	$744.85 million	$3.58	7.27
LendingTree	$1.27 billion	0.30	$151.31 million	$12.90	2.08

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

Summary

SLM beats LendingTree on 7 of the 13 factors compared between the two stocks.

About SLM

SLM Corporation, through its subsidiaries, originates and services private education loans to students and their families to finance the cost of their education in the United States. It is also involved in the provision of retail deposit accounts, including certificates of deposit, money market accounts, and high-yield savings accounts; and interest-bearing omnibus accounts. The company was formerly known as New BLC Corporation and changed its name to SLM Corporation in December 2013. SLM Corporation was founded in 1972 and is headquartered in Newark, Delaware.

About LendingTree

LendingTree, Inc., through its subsidiary, operates online consumer platform in the United States. It operates through three segments: Home, Consumer, and Insurance. The Home segment offers purchase mortgage, refinance mortgage, and home equity loans and lines of credit; and real estate brokerage services. The Consumer segment provides credit cards; personal, small business, student, and auto loans; deposit accounts; and other credit products, such as debt settlement services. The Insurance segment includes information, tools, and access to insurance quote products, including home, automobile, and health and Medicare through which consumers are matched with insurance lead aggregators to obtain insurance offers and policies. In addition, the company offers QuoteWizard, a marketplace for insurance comparison; ValuePenguin, a personal finance website that offers consumers objective analysis on various financial topics from insurance to credit cards; and Stash, a consumer investing and banking platform that offers a suite of personal investment accounts, traditional and Roth IRAs, custodial investment accounts, and banking services, including checking accounts and debit cards with a Stock-Back rewards program. The company was formerly known as Tree.com, Inc. and changed its name to LendingTree, Inc. in January 2015. LendingTree, Inc. was incorporated in 1996 and is based in Charlotte, North Carolina.