Critical Review: Fannie Mae (OTCMKTS:FNMA) versus Better Home & Finance (NASDAQ:BETR)

Better Home & Finance (NASDAQ:BETR) and Fannie Mae (OTCMKTS:FNMA) are both finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their earnings, risk, valuation, institutional ownership, profitability, analyst recommendations and dividends.

Insider and Institutional Ownership

20.9% of Better Home & Finance shares are owned by institutional investors. Comparatively, 0.0% of Fannie Mae shares are owned by institutional investors. 23.6% of Better Home & Finance shares are owned by company insiders. Comparatively, 1.0% of Fannie Mae shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Better Home & Finance and Fannie Mae’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Better Home & Finance	-153.25%	N/A	-16.80%
Fannie Mae	7.02%	-37.47%	0.34%

Analyst Recommendations

This is a summary of current ratings for Better Home & Finance and Fannie Mae, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Better Home & Finance	1	2	0	0	1.67
Fannie Mae	1	2	1	0	2.00

Fannie Mae has a consensus target price of $13.33, suggesting a potential upside of 17.89%. Given Fannie Mae’s stronger consensus rating and higher probable upside, analysts clearly believe Fannie Mae is more favorable than Better Home & Finance.

Valuation & Earnings

This table compares Better Home & Finance and Fannie Mae”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Better Home & Finance	$108.49 million	10.32	-$206.29 million	($13.21)	-5.52
Fannie Mae	$152.67 billion	0.09	$16.98 billion	N/A	N/A

Fannie Mae has higher revenue and earnings than Better Home & Finance.

Volatility and Risk

Better Home & Finance has a beta of 1.92, meaning that its share price is 92% more volatile than the S&P 500. Comparatively, Fannie Mae has a beta of 2.04, meaning that its share price is 104% more volatile than the S&P 500.

Summary

Fannie Mae beats Better Home & Finance on 9 of the 13 factors compared between the two stocks.

About Better Home & Finance

Better Home & Finance Holding Co. engages in the provision of comprehensive homeownership services. It offers mortgage loans, real estate agent services, and title and homeowner’s insurance services. The company was founded in 2014 and is headquartered in New York, NY.

About Fannie Mae

Federal National Mortgage Association provides financing solutions for mortgages in the United States. It operates through two segments, Single-Family and Multifamily. The Single-Family segment securitizes and purchases single-family fixed-rate or adjustable-rate, first-lien mortgage loans, or mortgage-related securities backed by these loans; and loans that are insured by Federal Housing Administration, loans guaranteed by the Department of Veterans Affairs and Rural Development Housing and Community Facilities Program of the U.S. Department of Agriculture, manufactured housing mortgage loans, and other mortgage-related securities. The Multifamily segment securitizes multifamily mortgage loans into Fannie Mae mortgage backed securities (MBS); purchases multifamily mortgage loans; and provides credit enhancement for bonds issued by state and local housing finance authorities to finance multifamily housing. This segment also issues structured MBS backed by Fannie Mae multifamily MBS; buys and sells multifamily agency mortgage-backed securities; and invests in low-income housing tax credit multifamily projects. Federal National Mortgage Association was founded in 1938 and is based in Washington, the District of Columbia.