Head-To-Head Survey: Freddie Mac (OTCMKTS:FMCC) & PennyMac Financial Services (NYSE:PFSI)

Freddie Mac (OTCMKTS:FMCC) and PennyMac Financial Services (NYSE:PFSI) are both mid-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, risk, analyst recommendations, earnings, valuation, profitability and dividends.

Earnings and Valuation

This table compares Freddie Mac and PennyMac Financial Services”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Freddie Mac	$122.05 billion	0.05	$11.86 billion	($0.03)	-324.00
PennyMac Financial Services	$1.59 billion	3.55	$311.42 million	$7.21	15.18

Freddie Mac has higher revenue and earnings than PennyMac Financial Services. Freddie Mac 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.

Risk and Volatility

Freddie Mac has a beta of 2.1, meaning that its share price is 110% more volatile than the S&P 500. Comparatively, PennyMac Financial Services has a beta of 1.51, meaning that its share price is 51% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Freddie Mac	9.04%	-44.33%	0.34%
PennyMac Financial Services	22.00%	12.18%	1.95%

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Freddie Mac and PennyMac Financial Services, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Freddie Mac	1	0	0	0	1.00
PennyMac Financial Services	0	1	5	0	2.83

Freddie Mac currently has a consensus target price of $4.50, indicating a potential downside of 53.70%. PennyMac Financial Services has a consensus target price of $118.67, indicating a potential upside of 8.44%. Given PennyMac Financial Services’ stronger consensus rating and higher possible upside, analysts clearly believe PennyMac Financial Services is more favorable than Freddie Mac.

Institutional & Insider Ownership

57.9% of PennyMac Financial Services shares are owned by institutional investors. 0.1% of Freddie Mac shares are owned by insiders. Comparatively, 15.8% of PennyMac Financial Services shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Summary

PennyMac Financial Services beats Freddie Mac on 11 of the 14 factors compared between the two stocks.

About Freddie Mac

Federal Home Loan Mortgage Corporation operates in the secondary mortgage market in the United States. It operates through two segments, Single-Family and Multifamily. The Single-Family segment purchases, securitizes, and guarantees single-family loans; and manages single-family mortgage credit and market risk, as well as manages mortgage-related investments portfolio, single-family securitization activities, and treasury functions. This segment serves mortgage banking companies, commercial banks, regional banks, community banks, credit unions, housing finance agencies, savings institutions, and non-depository financial institutions. The Multifamily segment engages in the purchase, securitization, and guarantee of multifamily loans; issuance of multifamily K certificates; manages multifamily mortgage credit and market risk; and invests in multifamily loans and mortgage-related securities. It serves banks and other financial institutions, insurance companies, money managers, hedge funds, pension funds, state and local governments, and broker dealers. Federal Home Loan Mortgage Corporation incorporated in 1970 and is headquartered in McLean, Virginia.

About PennyMac Financial Services

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.