PennyMac Financial Services (NYSE:PFSI) versus Fannie Mae (OTCMKTS:FNMA) Head-To-Head Contrast

Fannie Mae (OTCMKTS:FNMA) and PennyMac Financial Services (NYSE:PFSI) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, valuation, profitability, institutional ownership, risk and earnings.

Risk and Volatility

Fannie Mae has a beta of 2.04, meaning that its share price is 104% more volatile than the S&P 500. Comparatively, PennyMac Financial Services has a beta of 1.56, meaning that its share price is 56% more volatile than the S&P 500.

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Fannie Mae	$152.67 billion	0.09	$16.98 billion	N/A	N/A
PennyMac Financial Services	$2.90 billion	2.24	$311.42 million	$9.28	13.56

Fannie Mae has higher revenue and earnings than PennyMac Financial Services.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Fannie Mae	7.02%	-37.47%	0.34%
PennyMac Financial Services	25.21%	11.69%	1.87%

Analyst Recommendations

This is a breakdown of current ratings for Fannie Mae and PennyMac Financial Services, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Fannie Mae	2	1	1	0	1.75
PennyMac Financial Services	0	4	4	0	2.50

Fannie Mae presently has a consensus target price of $13.33, indicating a potential upside of 18.51%. PennyMac Financial Services has a consensus target price of $138.67, indicating a potential upside of 10.22%. Given Fannie Mae’s higher probable upside, equities analysts clearly believe Fannie Mae is more favorable than PennyMac Financial Services.

Insider & Institutional Ownership

0.0% of Fannie Mae shares are held by institutional investors. Comparatively, 57.9% of PennyMac Financial Services shares are held by institutional investors. 1.0% of Fannie Mae shares are held by insiders. Comparatively, 15.8% of PennyMac Financial Services shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

PennyMac Financial Services beats Fannie Mae on 8 of the 13 factors compared between the two stocks.

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.

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.