Critical Analysis: Fortress Investment Group (FIG) vs. UBS AG (UBS)

Fortress Investment Group (NYSE: FIG) and UBS AG (NYSE:UBS) are both mid-cap 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

40.2% of Fortress Investment Group shares are held by institutional investors. Comparatively, 31.4% of UBS AG shares are held by institutional investors. 45.2% of Fortress Investment Group shares are held by company insiders. Comparatively, 1.0% of UBS AG 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 Fortress Investment Group and UBS AG, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Fortress Investment Group 0 3 0 0 2.00
UBS AG 0 3 6 0 2.67

Fortress Investment Group currently has a consensus target price of $6.00, indicating a potential downside of 24.72%. Given Fortress Investment Group’s higher possible upside, research analysts plainly believe Fortress Investment Group is more favorable than UBS AG.

Dividends

Fortress Investment Group pays an annual dividend of $0.36 per share and has a dividend yield of 4.5%. UBS AG pays an annual dividend of $0.60 per share and has a dividend yield of 3.5%. Fortress Investment Group pays out 81.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. UBS AG pays out 56.6% of its earnings in the form of a dividend. UBS AG has raised its dividend for 4 consecutive years.

Profitability

This table compares Fortress Investment Group and UBS AG’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Fortress Investment Group 10.61% 38.79% 15.58%
UBS AG 11.09% 7.80% 0.46%

Risk and Volatility

Fortress Investment Group has a beta of 1.92, indicating that its share price is 92% more volatile than the S&P 500. Comparatively, UBS AG has a beta of 1.25, indicating that its share price is 25% more volatile than the S&P 500.

Earnings and Valuation

This table compares Fortress Investment Group and UBS AG’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Fortress Investment Group $950.66 million 1.84 $273.52 million $0.44 18.11
UBS AG $30.48 billion 2.10 $3.94 billion $1.06 16.26

UBS AG has higher revenue and earnings than Fortress Investment Group. UBS AG is trading at a lower price-to-earnings ratio than Fortress Investment Group, indicating that it is currently the more affordable of the two stocks.

Summary

UBS AG beats Fortress Investment Group on 10 of the 17 factors compared between the two stocks.

About Fortress Investment Group

Fortress Investment Group LLC (Fortress) is an investment management firm. The Company operates through segments, including private equity funds, permanent capital vehicles, credit hedge funds, credit PE funds, liquid hedge funds and Logan Circle. Its business is to sponsor the formation of, and provide investment management services for, various investment funds, permanent capital vehicles and related managed accounts (the Fortress Funds). Fortress’s sources of income from the Fortress Funds are management fees, incentive income and investment income on its investments in the funds. As of December 31, 2016, the Company’s private equity business manages approximately $13.5 billion of assets under management (AUM); credit funds business manages approximately $18.1 billion of AUM; liquid hedge funds business manages over $4.6 billion of AUM, and Logan Circle business manages approximately $33.4 billion of AUM.

About UBS AG

UBS Group AG is a holding company and conducts its operations through UBS AG and its subsidiaries. The Company comprises Corporate Center and five business divisions: Wealth Management, Wealth Management Americas, Personal & Corporate Banking, Asset Management and the Investment Bank. Wealth Management division provides advice and tailored financial services to wealthy private clients around the world, except those served by Wealth Management Americas. Wealth Management Americas division is a wealth manager in the Americas in terms of financial advisor productivity and invested assets by financial advisor. Personal & Corporate Banking division provides financial products and services to private, corporate and institutional clients in Switzerland. Asset Management division provides investment management products and services, platform solutions and advisory support. Investment Bank division provides investment advice, financial solutions and capital markets access.

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