Critical Review: PennyMac Financial Services (NYSE:PFSI) versus First National Financial (OTCMKTS:FNLIF)

First National Financial (OTCMKTS:FNLIFGet Free Report) and PennyMac Financial Services (NYSE:PFSIGet Free Report) are both financial services companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, dividends, valuation, analyst recommendations, profitability, earnings and risk.

Profitability

This table compares First National Financial and PennyMac Financial Services’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
First National Financial N/A N/A N/A
PennyMac Financial Services 10.94% 10.48% 1.96%

Dividends

First National Financial pays an annual dividend of $1.46 per share and has a dividend yield of 5.6%. PennyMac Financial Services pays an annual dividend of $0.80 per share and has a dividend yield of 0.9%. First National Financial pays out 69.6% of its earnings in the form of a dividend. PennyMac Financial Services pays out 27.8% 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.

Valuation and Earnings

This table compares First National Financial and PennyMac Financial Services’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
First National Financial N/A N/A N/A $2.09 12.36
PennyMac Financial Services $1.40 billion 3.29 $144.66 million $2.88 31.43

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

Analyst Ratings

This is a breakdown of current ratings for First National Financial and PennyMac Financial Services, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
First National Financial 0 0 0 0 N/A
PennyMac Financial Services 0 1 6 0 2.86

First National Financial presently has a consensus price target of $48.67, indicating a potential upside of 87.97%. PennyMac Financial Services has a consensus price target of $97.75, indicating a potential upside of 7.98%. Given First National Financial’s higher possible upside, equities research analysts clearly believe First National Financial is more favorable than PennyMac Financial Services.

Insider & Institutional Ownership

4.1% of First National Financial shares are owned by institutional investors. Comparatively, 57.9% of PennyMac Financial Services shares are owned by institutional investors. 16.6% of PennyMac Financial Services shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Summary

PennyMac Financial Services beats First National Financial on 10 of the 12 factors compared between the two stocks.

About First National Financial

(Get Free Report)

First National Financial Corporation, together with its subsidiaries, originates, underwrites, and services commercial and residential mortgages in Canada. It operates in two segments, Residential and Commercial segments. The company offers single-family and multi-unit residential, and commercial mortgages. It provides its services through mortgage broker distribution channel, as well as online. The company was founded in 1988 and is headquartered in Toronto, Canada.

About PennyMac Financial Services

(Get Free Report)

PennyMac Financial Services, Inc., through its subsidiaries, engages in the mortgage banking and investment management activities in the United States. The company operates through three segments: Production, Servicing, and Investment Management. The Production segment is involved in the origination, acquisition, and sale of loans. This segment sources residential conventional and government-insured or guaranteed mortgage loans through correspondent production, consumer direct lending, and broker direct lending. The Servicing segment performs loan servicing for both newly originated loans that are under holding for sale and loans services for others. The segment performs loan administration, collection, and default management activities, including the collection and remittance of loan payments; responds to customer inquiries; provides accounting for principal and interest; holds custodial funds for the payment of property taxes and insurance premiums; counsels delinquent borrowers; and supervising foreclosures and property dispositions, as well as administers loss mitigation activities, such as modification and forbearance programs. The Investment Management segment is involved in sourcing, performing diligence, bidding, and closing investment asset acquisitions; managing correspondent production activities for PennyMac Mortgage Investment Trust; and managing acquired assets. The company was founded in 2008 and is headquartered in Westlake Village, California.

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