Critical Comparison: CNFinance (NYSE:CNF) & PennyMac Financial Services (NYSE:PFSI)

PennyMac Financial Services (NYSE:PFSI) and CNFinance (NYSE:CNF) are both finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, valuation, risk, dividends, analyst recommendations, institutional ownership and earnings.

Volatility and Risk

PennyMac Financial Services has a beta of 1.51, suggesting that its stock price is 51% more volatile than the S&P 500. Comparatively, CNFinance has a beta of 0.05, suggesting that its stock price is 95% less volatile than the S&P 500.

Earnings and Valuation

This table compares PennyMac Financial Services and CNFinance”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
PennyMac Financial Services	$1.59 billion	3.97	$311.42 million	$7.21	16.99
CNFinance	$205.99 million	0.11	$5.26 million	$0.31	10.89

PennyMac Financial Services has higher revenue and earnings than CNFinance. CNFinance 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.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
PennyMac Financial Services	22.00%	12.18%	1.95%
CNFinance	N/A	N/A	N/A

Analyst Recommendations

This is a breakdown of current ratings and target prices for PennyMac Financial Services and CNFinance, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
PennyMac Financial Services	0	1	5	0	2.83
CNFinance	0	1	0	1	3.00

PennyMac Financial Services presently has a consensus target price of $119.33, suggesting a potential downside of 2.56%. Given PennyMac Financial Services’ higher probable upside, equities research analysts plainly believe PennyMac Financial Services is more favorable than CNFinance.

Insider & Institutional Ownership

57.9% of PennyMac Financial Services shares are held by institutional investors. 15.8% of PennyMac Financial Services shares are held by insiders. Comparatively, 25.8% of CNFinance shares are held 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 CNFinance on 12 of the 15 factors compared between the two stocks.

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.

About CNFinance

CNFinance Holdings Limited, through its subsidiaries, provides home equity loan services in the People's Republic of China. It offers micro credit loan services for micro and small-enterprise owners; and loan lending agency services for financial institutions. The company provides bridge loan products, which are unsecured short-term loans to pay off borrowers' existing loans secured by real property. It operates approximately 87 branches and sub-branches in China. The company was founded in 1999 and is headquartered in Guangzhou, the People's Republic of China.