Cathay General Bancorp (NASDAQ: CATY) and PennyMac Financial Services (NYSE:PFSI) are both finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, profitability, analyst recommendations, earnings, risk, valuation and dividends.

Valuation & Earnings

This table compares Cathay General Bancorp and PennyMac Financial Services’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Cathay General Bancorp $475.33 million 6.22 $196.31 million $2.43 15.06
PennyMac Financial Services $1.24 billion 0.33 $69.82 million $2.97 5.77

Cathay General Bancorp has higher revenue, but lower earnings than PennyMac Financial Services. PennyMac Financial Services is trading at a lower price-to-earnings ratio than Cathay General Bancorp, indicating that it is currently the more affordable of the two stocks.

Dividends

Cathay General Bancorp pays an annual dividend of $0.84 per share and has a dividend yield of 2.3%. PennyMac Financial Services does not pay a dividend. Cathay General Bancorp pays out 34.6% of its earnings in the form of a dividend.

Risk & Volatility

Cathay General Bancorp has a beta of 1.29, indicating that its stock price is 29% more volatile than the S&P 500. Comparatively, PennyMac Financial Services has a beta of 0.61, indicating that its stock price is 39% less volatile than the S&P 500.

Institutional and Insider Ownership

67.8% of Cathay General Bancorp shares are held by institutional investors. Comparatively, 86.6% of PennyMac Financial Services shares are held by institutional investors. 5.8% of Cathay General Bancorp shares are held by company insiders. Comparatively, 45.6% of PennyMac Financial Services shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Cathay General Bancorp and PennyMac Financial Services’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cathay General Bancorp 35.30% 10.54% 1.36%
PennyMac Financial Services 6.87% 4.79% 1.21%

Analyst Ratings

This is a summary of current recommendations and price targets for Cathay General Bancorp and PennyMac Financial Services, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cathay General Bancorp 0 3 2 0 2.40
PennyMac Financial Services 1 1 4 0 2.50

Cathay General Bancorp presently has a consensus target price of $40.20, suggesting a potential upside of 9.87%. PennyMac Financial Services has a consensus target price of $20.25, suggesting a potential upside of 18.08%. Given PennyMac Financial Services’ stronger consensus rating and higher probable upside, analysts plainly believe PennyMac Financial Services is more favorable than Cathay General Bancorp.

Cathay General Bancorp Company Profile

Cathay General Bancorp is a bank holding company. The Company holds Cathay Bank, a California state-chartered commercial bank (the Bank); seven limited partnerships investing in affordable housing investments; GBC Venture Capital, Inc., and Asia Realty Corp. The Company also owns the common stock of five statutory business trusts created for issuing capital securities. The Bank primarily services individuals, professionals and small to medium-sized businesses in the local markets and provides commercial mortgage loans, commercial loans, small business administration (SBA) loans, residential mortgage loans, real estate construction loans, home equity lines of credit and installment loans to individuals for automobile, household and other consumer expenditures. The Bank offers passbook accounts, checking accounts, money market deposit accounts, certificates of deposit, individual retirement accounts, college certificates of deposit and public funds deposits.

PennyMac Financial Services Company Profile

PennyMac Financial Services, Inc. (PFSI) is a financial services company. The Company is focused on the production and servicing of the United States residential mortgage loans and the management of investments related to the United States mortgage market. The Company operates through three segments: loan production, loan servicing and investment management. PFSI’s mortgage banking subsidiary, PennyMac Loan Services, LLC (PLS), is a non-bank producer and servicer of mortgage loans in the United States. As of December 31, 2016, PLS serviced loans in all 50 states, the District of Columbia, Guam and the United States Virgin Islands, and originated loans in 49 states and the District of Columbia. PFSI’s investment management subsidiary, PNMAC Capital Management, LLC (PCM), is an investment advisor. PLS is a seller and servicer for the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

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