Analyzing Upstart (NASDAQ:UPST) and Ally Financial (NYSE:ALLY)

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

Risk & Volatility

Ally Financial has a beta of 1.17, indicating that its stock price is 17% more volatile than the S&P 500. Comparatively, Upstart has a beta of 2.48, indicating that its stock price is 148% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Ally Financial	16.84%	12.11%	0.81%
Upstart	4.86%	9.67%	2.50%

Institutional & Insider Ownership

88.8% of Ally Financial shares are owned by institutional investors. Comparatively, 63.0% of Upstart shares are owned by institutional investors. 0.5% of Ally Financial shares are owned by company insiders. Comparatively, 17.3% of Upstart shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Ally Financial and Upstart, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ally Financial	1	5	10	1	2.65
Upstart	1	9	7	0	2.35

Ally Financial currently has a consensus target price of $47.93, indicating a potential upside of 27.28%. Upstart has a consensus target price of $32.40, indicating a potential upside of 58.75%. Given Upstart’s higher probable upside, analysts plainly believe Upstart is more favorable than Ally Financial.

Valuation & Earnings

This table compares Ally Financial and Upstart”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ally Financial	$7.91 billion	1.43	$852.00 million	$4.36	8.64
Upstart	$1.04 billion	1.93	$53.60 million	$0.59	34.59

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

Summary

Ally Financial beats Upstart on 9 of the 15 factors compared between the two stocks.

About Ally Financial

Ally Financial Inc. is a U.S. digital financial services company and bank holding company. Its primary businesses include automotive finance and consumer banking, with products and services offered through digital channels and a network of auto dealerships. Through its automotive finance operations, Ally provides loans and leases to vehicle buyers, financing to dealerships, and related services. Ally Bank offers consumer deposit products, including checking accounts, savings accounts and certificates of deposit, as well as lending products.

About Upstart

Upstart Holdings, Inc. operates an artificial intelligence–based lending marketplace that connects consumers seeking loans with banks and credit unions. Its platform uses machine-learning models and borrower data to help lending partners assess credit risk and make lending decisions. The company’s offerings include personal loans and technology for auto lending, including auto retail and refinancing. Upstart was founded in 2012 by Dave Girouard, Paul Gu and Anna Counselman. Girouard serves as the company’s chief executive officer.