LexinFintech (NASDAQ:LX) and Nelnet (NYSE:NNI) Critical Comparison

Nelnet (NYSE:NNI) and LexinFintech (NASDAQ:LX) are both finance companies, but which is the better business? We will compare the two companies based on the strength of their profitability, risk, institutional ownership, earnings, valuation, dividends and analyst recommendations.

Dividends

Nelnet pays an annual dividend of $1.12 per share and has a dividend yield of 1.0%. LexinFintech pays an annual dividend of $0.18 per share and has a dividend yield of 2.6%. Nelnet pays out 21.2% of its earnings in the form of a dividend. LexinFintech pays out 17.0% 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. LexinFintech is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation & Earnings

This table compares Nelnet and LexinFintech”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Nelnet	$1.18 billion	3.48	$184.04 million	$5.29	21.45
LexinFintech	$1.95 billion	0.60	$150.76 million	$1.06	6.52

Nelnet has higher earnings, but lower revenue than LexinFintech. LexinFintech is trading at a lower price-to-earnings ratio than Nelnet, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

Nelnet has a beta of 0.95, suggesting that its share price is 5% less volatile than the S&P 500. Comparatively, LexinFintech has a beta of 0.43, suggesting that its share price is 57% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Nelnet and LexinFintech, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Nelnet	0	1	0	0	2.00
LexinFintech	0	0	2	0	3.00

Nelnet currently has a consensus price target of $98.00, indicating a potential downside of 13.62%. LexinFintech has a consensus price target of $13.60, indicating a potential upside of 96.82%. Given LexinFintech’s stronger consensus rating and higher probable upside, analysts plainly believe LexinFintech is more favorable than Nelnet.

Profitability

This table compares Nelnet and LexinFintech’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Nelnet	9.44%	6.00%	1.39%
LexinFintech	9.44%	12.52%	5.88%

Institutional & Insider Ownership

33.5% of Nelnet shares are owned by institutional investors. 50.9% of Nelnet shares are owned by insiders. Comparatively, 27.8% of LexinFintech shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Summary

LexinFintech beats Nelnet on 8 of the 15 factors compared between the two stocks.

About Nelnet

Nelnet, Inc. engages in loan servicing, communications, education technology, services, and payment processing businesses worldwide. The Loan Servicing and Systems segment provides loan conversion, application processing, borrower updates, customer service, payment processing, due diligence procedures, funds management reconciliation, and claim processing services. This segment also offers student loan servicing software; business process outsourcing services specialized in contact center management, such as inbound calls, outreach campaigns and sales, and interacting with customers through multi-channels, and processing and technology services. The Education Technology Services and Payments segment provides financial management services; school information system software; website design and cost-effective admissions software; FACTS Giving, a donation platform; and customized professional development and coaching services, educational instruction services, and technology products that aid in teacher and student evaluations. This segment also offers tuition payment plans, and service and technology for student billings, payments, and refunds; solutions for in-person, online, and mobile payment experiences on campus; payment processing services, such as credit card and electronic transfer; faith community, giving, and learning management services and technologies; and an integrated commerce payment platform, financial management, and tuition payment plan services, as well as a school management platform that provides administrative, information and financial management, and communication functions for K-12 schools. The Asset Generation and Management segment acquires, manages, and owns loan assets. The Nelnet Bank segment operates as an internet industrial bank. It also offers investment advisory, insurance, and reinsurance services, as well as engages in real estate investment business. The company was incorporated in 1977 and is headquartered in Lincoln, Nebraska.

About LexinFintech

LexinFintech Holdings Ltd., through its subsidiaries, provides online consumer finance services in the People's Republic of China. The company operates Fenqile.com, an online consumption and consumer finance platform that offers installment purchase and personal installment loans, as well as online direct sales with installment payment terms; and Le Hua Card, a scenario-based lending. It also provides technology-driven platform services for financial institution customers and partners to increase revenues, manage financial risks, enhance operating efficiency and service quality, enhance collections, and reduce overall costs; Maiya application, a location-based services shopping experience with buy-now and pay-later options; and Juzi Licai, an online investment platform. In addition, the company offers technical support and consulting, software development, financing guarantee, and financial technology services. The company was formerly known as Staging Finance Holding Ltd. and changed its name to LexinFintech Holdings Ltd. in March 2017. LexinFintech Holdings Ltd. was founded in 2013 and is headquartered in Shenzhen, the People's Republic of China.