Analyzing Banco Bradesco (BBD) and Royal Bank of Canada (RY)

Banco Bradesco (NYSE: BBD) and Royal Bank of Canada (NYSE:RY) are both large-cap financials companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, risk, valuation, dividends, analyst recommendations, institutional ownership and profitability.

Profitability

This table compares Banco Bradesco and Royal Bank of Canada’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Banco Bradesco 9.17% 17.71% 1.57%
Royal Bank of Canada 22.62% 17.01% 0.95%

Earnings and Valuation

This table compares Banco Bradesco and Royal Bank of Canada’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Banco Bradesco $46.77 billion 1.40 $4.32 billion $0.90 10.87
Royal Bank of Canada $40.37 billion 2.86 $8.74 billion $5.76 13.81

Royal Bank of Canada has lower revenue, but higher earnings than Banco Bradesco. Banco Bradesco is trading at a lower price-to-earnings ratio than Royal Bank of Canada, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

2.7% of Banco Bradesco shares are owned by institutional investors. Comparatively, 40.7% of Royal Bank of Canada shares are owned by institutional investors. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Risk and Volatility

Banco Bradesco has a beta of 1.72, meaning that its share price is 72% more volatile than the S&P 500. Comparatively, Royal Bank of Canada has a beta of 1.07, meaning that its share price is 7% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Banco Bradesco and Royal Bank of Canada, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Banco Bradesco 0 1 3 0 2.75
Royal Bank of Canada 1 6 0 0 1.86

Banco Bradesco currently has a consensus price target of $12.40, suggesting a potential upside of 26.79%. Royal Bank of Canada has a consensus price target of $102.67, suggesting a potential upside of 29.03%. Given Royal Bank of Canada’s higher probable upside, analysts clearly believe Royal Bank of Canada is more favorable than Banco Bradesco.

Dividends

Banco Bradesco pays an annual dividend of $0.06 per share and has a dividend yield of 0.6%. Royal Bank of Canada pays an annual dividend of $2.87 per share and has a dividend yield of 3.6%. Banco Bradesco pays out 6.7% of its earnings in the form of a dividend. Royal Bank of Canada pays out 49.8% 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. Royal Bank of Canada has raised its dividend for 3 consecutive years. Royal Bank of Canada is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Royal Bank of Canada beats Banco Bradesco on 9 of the 16 factors compared between the two stocks.

About Banco Bradesco

Banco Bradesco S.A. is a commercial bank. The Bank offers a range of banking and financial products and services in Brazil and abroad to individuals, large, mid-sized and small companies, and local and international corporations and institutions. Its segments include Financial; Insurance and Capitalization bonds; Pension plans, and Other Activities. The Financial segment consists of financial institutions and holding companies, which are responsible for managing financial resources, and credit card, consortium and asset management companies. The Insurance Group segment comprises insurance, pension plan and capitalization bond companies. It offers banking services, including deposit-taking activities, individual and corporate banking services, credit and debit cards, leasing operations, investment banking, asset management, consortium services and others. Its insurance services include health insurance, life and personal accident insurance, automobile, casualty and pension plans.

About Royal Bank of Canada

Royal Bank of Canada (RBC), is a diversified financial services company. The Company provides personal and commercial banking, wealth management services, insurance, investor services and capital markets products and services on a global basis. The Company serves personal, business, public sector and institutional clients in Canada, the United States and approximately 40 other countries. The Company’s business segments include Personal and Commercial Banking, Wealth Management, Insurance, Investor and Treasury Services, Capital Markets. The Company, through its segments, serves various lines of businesses, which include Personal Financial Services, Business Financial Services, Cards and Payment Solutions (Canadian Banking), Caribbean and United States Banking, Canadian Wealth Management, United States and International Wealth Management, Global Asset Management, Canadian Insurance, International Insurance, Corporate and Investment Banking, Global Markets and Other.

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