Reviewing CIT Group (CIT) & Bank of Nova Scotia (NYSE:BNS)

Bank of Nova Scotia (NYSE: BNS) and CIT Group (NYSE:CIT) are both mid-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their valuation, institutional ownership, analyst recommendations, dividends, profitability, risk and earnings.

Insider and Institutional Ownership

47.0% of Bank of Nova Scotia shares are owned by institutional investors. 0.5% of CIT Group shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Volatility & Risk

Bank of Nova Scotia has a beta of 1.26, meaning that its stock price is 26% more volatile than the S&P 500. Comparatively, CIT Group has a beta of 1.49, meaning that its stock price is 49% more volatile than the S&P 500.

Dividends

Bank of Nova Scotia pays an annual dividend of $2.47 per share and has a dividend yield of 3.8%. CIT Group pays an annual dividend of $0.64 per share and has a dividend yield of 1.2%. Bank of Nova Scotia pays out 49.7% of its earnings in the form of a dividend. CIT Group pays out -27.0% 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.

Valuation & Earnings

This table compares Bank of Nova Scotia and CIT Group’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Bank of Nova Scotia $28.86 billion 2.74 $6.12 billion $4.97 13.24
CIT Group $3.09 billion 2.26 -$848.00 million ($2.37) -22.45

Bank of Nova Scotia has higher revenue and earnings than CIT Group. CIT Group is trading at a lower price-to-earnings ratio than Bank of Nova Scotia, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Bank of Nova Scotia and CIT Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Bank of Nova Scotia 22.20% 14.62% 0.90%
CIT Group -20.05% 6.22% 0.94%

Analyst Recommendations

This is a summary of current recommendations for Bank of Nova Scotia and CIT Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Bank of Nova Scotia 0 0 9 0 3.00
CIT Group 1 5 7 0 2.46

Bank of Nova Scotia presently has a consensus price target of $90.00, indicating a potential upside of 36.76%. CIT Group has a consensus price target of $52.60, indicating a potential downside of 1.15%. Given Bank of Nova Scotia’s stronger consensus rating and higher possible upside, equities research analysts clearly believe Bank of Nova Scotia is more favorable than CIT Group.

Summary

Bank of Nova Scotia beats CIT Group on 12 of the 16 factors compared between the two stocks.

Bank of Nova Scotia Company Profile

The Bank of Nova Scotia is an international bank and a financial services provider in North America, Latin America, the Caribbean and Central America, and Asia-Pacific. The Bank offers a range of advice, products and services, including personal and commercial banking, wealth management and private banking, corporate and investment banking, and capital markets. Its segments include Canadian Banking, which provides a suite of financial advice and banking solutions to retail, small business, commercial and wealth management customers in Canada; International Banking, which provides a range of financial products, solutions and advice to retail and commercial customers in select regions outside of Canada; Global Banking and Markets, which provides corporate banking, investment banking, capital markets and transaction banking solutions, and Other, which represents smaller operating segments, including Group Treasury.

CIT Group Company Profile

CIT Group Inc. (CIT) is a bank holding company (BHC) and a financial holding company (FHC). The Company, together with its subsidiaries, provides financing, leasing and advisory services to middle market companies in a range of industries in North America. The Company’s segments include Commercial Banking, Consumer Banking, Non-Strategic Portfolios, and Corporate and Other. The Commercial Banking segment consists of four divisions: Commercial Finance, Rail, Real Estate Finance, and Business Capital. The Consumer Banking segment includes Retail Banking, Mortgage Lending, and SBA Lending (together referred to as Other Consumer Banking), and Legacy Consumer Mortgages (LCM). The Company’s products and services include account receivables collection, acquisition and expansion financing, asset management and servicing, asset-based loans, debt underwriting and syndication, deposits, enterprise value and cash flow loans, equipment leases, factoring services and financial risk management.

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