Financial Analysis: Silvergate Capital (NYSE:SI) versus Ally Financial (NYSE:ALLY)

Ally Financial (NYSE:ALLY) and Silvergate Capital (NYSE:SI) are both finance companies, but which is the better business? We will compare the two businesses based on the strength of their valuation, risk, profitability, institutional ownership, earnings, dividends and analyst recommendations.

Insider and Institutional Ownership

88.8% of Ally Financial shares are held by institutional investors. Comparatively, 94.4% of Silvergate Capital shares are held by institutional investors. 0.7% of Ally Financial shares are held by company insiders. Comparatively, 1.7% of Silvergate Capital shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Ally Financial and Silvergate Capital, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ally Financial	2	8	9	0	2.37
Silvergate Capital	0	0	0	0	0.00

Ally Financial currently has a consensus target price of $42.53, indicating a potential upside of 13.42%. Given Ally Financial’s stronger consensus rating and higher possible upside, research analysts plainly believe Ally Financial is more favorable than Silvergate Capital.

Dividends

Ally Financial pays an annual dividend of $1.20 per share and has a dividend yield of 3.2%. Silvergate Capital pays an annual dividend of $2.94 per share and has a dividend yield of 840.6%. Ally Financial pays out 46.2% of its earnings in the form of a dividend. Silvergate Capital pays out -9.8% 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. Silvergate Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Ally Financial and Silvergate Capital”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ally Financial	$8.90 billion	1.29	$668.00 million	$2.60	14.42
Silvergate Capital	-$609.47 million	-0.02	-$937.91 million	($29.96)	-0.01

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

Risk and Volatility

Ally Financial has a beta of 1.4, indicating that its share price is 40% more volatile than the S&P 500. Comparatively, Silvergate Capital has a beta of 2.23, indicating that its share price is 123% more volatile than the S&P 500.

Profitability

This table compares Ally Financial and Silvergate Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ally Financial	11.29%	9.31%	0.57%
Silvergate Capital	45.10%	8.87%	0.81%

Summary

Ally Financial beats Silvergate Capital on 9 of the 16 factors compared between the two stocks.

About Ally Financial

Ally Financial Inc., a digital financial-services company, provides various digital financial products and services in the United States, Canada, and Bermuda. The company operates through Automotive Finance Operations, Insurance Operations, Mortgage Finance Operations, and Corporate Finance Operations segments. The Automotive Finance Operations segment offers automotive financing services, including providing retail installment sales contracts, loans and operating leases, term loans to dealers, financing dealer floorplans and other lines of credit to dealers, warehouse lines to automotive retailers, and fleet financing. It also provides financing services to companies and municipalities for the purchase or lease of vehicles, and vehicle-remarketing services. The Insurance Operations segment offers consumer finance protection and insurance products through the automotive dealer channel, and commercial insurance products directly to dealers. This segment provides vehicle service and maintenance contract, and guaranteed asset protection products; and underwrites commercial insurance coverages, which primarily insure dealers’ vehicle inventory. The Mortgage Finance Operations segment manages consumer mortgage loan portfolio that includes bulk purchases of jumbo and low-to-moderate income mortgage loans originated by third parties, as well as direct-to-consumer mortgage offerings. The Corporate Finance Operations segment provides senior secured leveraged cash flow and asset-based loans to middle market companies; leveraged loans; and commercial real estate product to serve companies in the nursing facilities, senior housing, and medical office buildings. It also offers commercial banking products and services. In addition, it provides securities brokerage and investment advisory services. The company was formerly known as GMAC Inc. and changed its name to Ally Financial Inc. in May 2010. Ally Financial Inc. was founded in 1919 and is based in Detroit, Michigan.

About Silvergate Capital

Silvergate Capital Corporation operates as a bank holding company for Silvergate Bank that provides banking products and services to business and individual clients in the United States. The company accepts deposit products, including interest and noninterest bearing demand accounts, money market and savings accounts, and certificates of deposit accounts. Its loan products comprise one-to-four family real estate loans, multi-family real estate loans, commercial real estate loans, construction loans, commercial and industrial loans, mortgage warehouse loans, and reverse mortgage loans, as well as consumer loans and other loans secured by personal property. The company also provides cash management services for digital currency-related businesses. Silvergate Capital Corporation was founded in 1988 and is headquartered in La Jolla, California.