Critical Analysis: Ally Financial (NYSE:ALLY) versus Lufax (NYSE:LU)

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Lufax	N/A	N/A	N/A
Ally Financial	16.75%	11.75%	0.79%

Volatility & Risk

Lufax has a beta of 0.76, meaning that its share price is 24% less volatile than the S&P 500. Comparatively, Ally Financial has a beta of 1.09, meaning that its share price is 9% more volatile than the S&P 500.

Valuation and Earnings

This table compares Lufax and Ally Financial”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Lufax	$3.77 billion	0.28	-$291.79 million	($0.61)	-2.02
Ally Financial	$9.63 billion	1.22	$852.00 million	$4.24	9.09

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

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Lufax and Ally Financial, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Lufax	2	1	1	0	1.75
Ally Financial	0	2	14	1	2.94

Lufax currently has a consensus target price of $1.70, indicating a potential upside of 37.65%. Ally Financial has a consensus target price of $53.67, indicating a potential upside of 39.25%. Given Ally Financial’s stronger consensus rating and higher possible upside, analysts clearly believe Ally Financial is more favorable than Lufax.

Insider & Institutional Ownership

69.1% of Lufax shares are owned by institutional investors. Comparatively, 88.8% of Ally Financial shares are owned by institutional investors. 0.5% of Ally Financial 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.

Summary

Ally Financial beats Lufax on 15 of the 15 factors compared between the two stocks.

About Lufax

Lufax Holding Ltd operates as a financial service empowering institution for small and micro businesses in China. The company offers loan products, including general unsecured loans and secured loans, as well as consumer finance loans. It also provides wealth management products, such as asset management plans, mutual fund products, private investment fund products, and trust products. The company was founded in 2005 and is headquartered in Shanghai, China.

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.