Reviewing PHH (PHH) and Stonegate Mortgage Corp (SGM)

PHH (NYSE: PHH) and Stonegate Mortgage Corp (NYSE:SGM) are both small-cap consumer lending – nec companies, but which is the better investment? We will contrast the two companies based on the strength of their risk, analyst recommendations, dividends, valuation, profitability, earnings and institutional ownership.

Valuation and Earnings

This table compares PHH and Stonegate Mortgage Corp’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
PHH $622.00 million 0.92 -$202.00 million ($5.74) -1.94
Stonegate Mortgage Corp N/A N/A N/A $1.16 6.89

Stonegate Mortgage Corp has higher revenue, but lower earnings than PHH. PHH is trading at a lower price-to-earnings ratio than Stonegate Mortgage Corp, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

PHH has a beta of 1.9, meaning that its stock price is 90% more volatile than the S&P 500. Comparatively, Stonegate Mortgage Corp has a beta of 1.45, meaning that its stock price is 45% more volatile than the S&P 500.

Institutional & Insider Ownership

97.5% of PHH shares are held by institutional investors. Comparatively, 44.3% of Stonegate Mortgage Corp shares are held by institutional investors. 2.5% of PHH shares are held by insiders. Comparatively, 44.5% of Stonegate Mortgage Corp shares are held 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.

Profitability

This table compares PHH and Stonegate Mortgage Corp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PHH -32.06% -28.48% -6.47%
Stonegate Mortgage Corp -13.22% -6.70% -1.57%

Analyst Recommendations

This is a summary of recent ratings for PHH and Stonegate Mortgage Corp, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PHH 0 2 1 0 2.33
Stonegate Mortgage Corp 0 1 0 0 2.00

PHH presently has a consensus price target of $15.83, indicating a potential upside of 42.39%. Stonegate Mortgage Corp has a consensus price target of $6.00, indicating a potential downside of 24.91%. Given PHH’s stronger consensus rating and higher possible upside, research analysts plainly believe PHH is more favorable than Stonegate Mortgage Corp.

Summary

PHH beats Stonegate Mortgage Corp on 6 of the 11 factors compared between the two stocks.

PHH Company Profile

PHH Corporation is a standalone mortgage company. The Company provides outsourced mortgage banking services to a range of clients, including financial institutions and real estate brokers throughout the United States, and is focused on originating, selling, servicing and subservicing residential mortgage loans through its subsidiary, PHH Mortgage Corporation and its subsidiaries. It operates through two segments: Mortgage Production and Mortgage Servicing. The Mortgage Production segment provides mortgage loan origination services and sells mortgage loans. The Mortgage Servicing segment performs servicing activities for loans originated by the Company and mortgage servicing rights purchased from others, and acts as a subservicer for certain clients that own the underlying mortgage servicing rights. The Mortgage Production segment provides private label mortgage services to financial institutions and real estate brokers, and sources mortgage loans through its retail platform.

Stonegate Mortgage Corp Company Profile

Stonegate Mortgage Corporation is a non-bank mortgage company. The Company is focused on originating, financing and servicing the United States residential mortgage loans. The Company’s segments include Originations, Servicing, Financing and Other. The Originations segment primarily originates and sells residential mortgage loans, which conform to the underwriting guidelines of the government sponsored enterprises and government agencies, and non-agency whole loan investors. The Servicing segment includes loan administration, collection and default activities, including the collection and remittance of loan payments, responding to customer inquiries, collection of principal and interest payments, holding custodial funds for the payment of property taxes and insurance premiums, counseling delinquent mortgagors and modifying loans. The Financing segment includes warehouse-lending activities to correspondent customers by the Company’s subsidiary, NattyMac, LLC.

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