Contrasting China Merchants Bank (OTCMKTS:CIHKY) and Burford Capital (NYSE:BUR)

China Merchants Bank (OTCMKTS:CIHKY) and Burford Capital (NYSE:BUR) are both finance companies, but which is the superior business? We will compare the two companies based on the strength of their earnings, profitability, analyst recommendations, institutional ownership, risk, valuation and dividends.

Valuation & Earnings

This table compares China Merchants Bank and Burford Capital”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
China Merchants Bank	$70.40 billion	2.04	$20.71 billion	$3.89	7.33
Burford Capital	$1.09 billion	3.12	$610.52 million	$1.16	13.37

China Merchants Bank has higher revenue and earnings than Burford Capital. China Merchants Bank is trading at a lower price-to-earnings ratio than Burford Capital, indicating that it is currently the more affordable of the two stocks.

Dividends

China Merchants Bank pays an annual dividend of $1.20 per share and has a dividend yield of 4.2%. Burford Capital pays an annual dividend of $0.12 per share and has a dividend yield of 0.8%. China Merchants Bank pays out 30.8% of its earnings in the form of a dividend. Burford Capital pays out 10.3% 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.

Risk and Volatility

China Merchants Bank has a beta of 0.31, indicating that its stock price is 69% less volatile than the S&P 500. Comparatively, Burford Capital has a beta of 0.59, indicating that its stock price is 41% less volatile than the S&P 500.

Analyst Ratings

This is a summary of current recommendations and price targets for China Merchants Bank and Burford Capital, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
China Merchants Bank	0	0	0	0	0.00
Burford Capital	0	0	3	0	3.00

Burford Capital has a consensus price target of $19.50, indicating a potential upside of 25.77%. Given Burford Capital’s stronger consensus rating and higher possible upside, analysts plainly believe Burford Capital is more favorable than China Merchants Bank.

Profitability

This table compares China Merchants Bank and Burford Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
China Merchants Bank	30.16%	13.27%	1.27%
Burford Capital	34.81%	8.07%	4.28%

Summary

Burford Capital beats China Merchants Bank on 9 of the 14 factors compared between the two stocks.

About China Merchants Bank

China Merchants Bank Co., Ltd., together with its subsidiaries, provides various banking products and services. It operates through Wholesale Finance Business, Retail Finance Business, and Other Business segments. The company offers current, demand, time, call, savings, notice, and renminbi accounts. Its loan products include personal commercial real estate, consumption, housing, and car loans; loans to finance for studying abroad; micro-business loans; mortgage loans for equipment; joint guarantee, special guarantee, and housing mortgage loan; bank acceptance, discount, liquid capital, and fixed asset loans; and loans for vessels. The company also offers credit cards; insurance products; open-ended funds; discount and guarantees for commercial bills, redemption of commercial bills, and guaranteed discount for commercial acceptance bills; and financial consultation, debt financing underwriting, merger and acquisition financing, and equity financing and enterprise listing services. In addition, it provides forfeiting and risk participation, escrow, cross-border RMB clearing, and interbank services; and risk and financial management, cross-border RMB and oversea financing, international factoring and settlement, and trade finance services. Further, the company offers financial leasing and guarantee, investment and wealth management, forex option and gold trading, forex express trading, international, offshore and private banking, custody, pension, and electronic banking services. The company also operates in Hong Kong, New York, London, Singapore, Luxembourg, Sydney, and Taipei. China Merchants Bank Co., Ltd. was founded in 1987 and is headquartered in Shenzhen, China.

About Burford Capital

Burford Capital Limited provides legal finance products and services worldwide. The company operates through two segments, Capital Provision, and Asset Management and Other Provision. The Capital Provision segment provides capital to the legal industry or in connection with legal matters directly and through investment in private funds; legal risk management services; lower risk legal finance business focusing on pre-settlement litigation matters with lower risk and lower expected returns; post-settlement finance; and complex strategies in which it acts as a principal and acquires assets that are mispriced. The Asset Management and Other Services segment provides services to the legal industry, including litigation insurance. Burford Capital Limited was incorporated in 2009 and is based in Saint Peter Port, Guernsey.