Critical Review: Brookfield (NYSE:BN) & B. Riley Financial (NASDAQ:RILY)

B. Riley Financial (NASDAQ:RILY) and Brookfield (NYSE:BN) are both finance companies, but which is the better business? We will contrast the two companies based on the strength of their dividends, risk, valuation, earnings, institutional ownership, analyst recommendations and profitability.

Profitability

This table compares B. Riley Financial and Brookfield’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
B. Riley Financial	35.88%	39,260.09%	22.99%
Brookfield	1.85%	3.93%	1.22%

Insider and Institutional Ownership

50.2% of B. Riley Financial shares are owned by institutional investors. Comparatively, 61.6% of Brookfield shares are owned by institutional investors. 27.8% of B. Riley Financial shares are owned by insiders. Comparatively, 11.0% of Brookfield shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for B. Riley Financial and Brookfield, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
B. Riley Financial	1	0	0	0	1.00
Brookfield	0	2	10	1	2.92

Brookfield has a consensus price target of $57.40, suggesting a potential upside of 55.36%. Given Brookfield’s stronger consensus rating and higher probable upside, analysts clearly believe Brookfield is more favorable than B. Riley Financial.

Valuation and Earnings

This table compares B. Riley Financial and Brookfield”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
B. Riley Financial	$1.13 billion	0.17	$307.42 million	$12.70	0.38
Brookfield	$77.06 billion	1.18	$1.31 billion	$0.55	67.17

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

Volatility and Risk

B. Riley Financial has a beta of 1.24, meaning that its share price is 24% more volatile than the S&P 500. Comparatively, Brookfield has a beta of 1.56, meaning that its share price is 56% more volatile than the S&P 500.

Dividends

B. Riley Financial pays an annual dividend of $2.00 per share and has a dividend yield of 41.2%. Brookfield pays an annual dividend of $0.28 per share and has a dividend yield of 0.8%. B. Riley Financial pays out 15.7% of its earnings in the form of a dividend. Brookfield pays out 50.9% 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. Brookfield has increased its dividend for 2 consecutive years. B. Riley Financial is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Brookfield beats B. Riley Financial on 11 of the 18 factors compared between the two stocks.

About B. Riley Financial

B. Riley Financial, Inc., through its subsidiaries, provides financial services to corporate, institutional, and high net worth clients in North America, Australia, the Asia Pacific, and Europe. The company operates through six segments: Capital Markets, Wealth Management, Financial Consulting, Auction and Liquidation, Communications, and Consumer. The Capital Markets segments offers investment banking, equity research, institutional sales and trading, securities lending, fund and asset management, direct lending, venture capital, proprietary trading, and investment services; merger and acquisition, restructuring advisory, and recapitalization services; public and private equity offerings; and debt financing solutions. This segment also trades in equity securities. The Wealth Management segment provides wealth management and tax services. The Financial Consulting segment offers bankruptcy restructuring and turnaround management, forensic accounting and litigation support, valuation and appraisal, and real estate services. The Auction and Liquidation Segment provides auction and liquidation services. The Communications segment offers dial-up, mobile broadband and digital subscriber line services under the NetZero and Juno brands; cloud communication services; VoIP cloud-based technology and communication devices and subscription services through magicJack; and mobile phone voice, text, and data services and devices through Marconi Wireless. The Consumer segment sells laptop and computer accessories. The company was formerly known as Great American Group, Inc. and changed its name to B. Riley Financial, Inc. in November 2014. B. Riley Financial, Inc. was founded in 1973 and is headquartered in Los Angeles, California.

About Brookfield

Brookfield Corporation is an alternative asset manager and REIT/Real Estate Investment Manager firm focuses on real estate, renewable power, infrastructure and venture capital and private equity assets. It manages a range of public and private investment products and services for institutional and retail clients. It typically makes investments in sizeable, premier assets across geographies and asset classes. It invests both its own capital as well as capital from other investors. Within private equity and venture capital, it focuses on acquisition, early ventures, control buyouts and financially distressed, buyouts and corporate carve-outs, recapitalizations, convertible, senior and mezzanine financings, operational and capital structure restructuring, strategic re-direction, turnaround, and under-performing midmarket companies. It invests in both public debt and equity markets. It invests in private equity sectors with focus on Business Services include infrastructure, healthcare, road fuel distribution and marketing, construction and real estate; Industrials include manufacturers of automotive batteries, graphite electrodes, returnable plastic packaging, and sanitation management and development; and Residential/ infrastructure services. It targets companies which likely possess underlying real assets, primarily in sectors such as industrial products, building materials, metals, mining, homebuilding, oil and gas, paper and packaging, manufacturing and forest product sectors. It invests globally with focus on North America including Brazil, the United States, Canada; Europe; and Australia; and Asia-Pacific. The firm considers equity investments in the range of $2 million to $500 million. It has a four-year investment period and a 10-year term with two one-year extensions. The firm prefers to take minority stake and majority stake. Brookfield Corporation was founded in 1997 and based in Toronto, Canada with additional offices across Northern America; South America; Europe; Middle East and Asia.