Berkshire Hills Bancorp (NYSE: BHLB) and PennyMac Financial Services (NYSE:PFSI) are both small-cap financials companies, but which is the superior stock? We will contrast the two companies based on the strength of their risk, earnings, dividends, profitability, valuation, analyst recommendations and institutional ownership.

Dividends

Berkshire Hills Bancorp pays an annual dividend of $0.84 per share and has a dividend yield of 2.1%. PennyMac Financial Services does not pay a dividend. Berkshire Hills Bancorp pays out 45.4% of its earnings in the form of a dividend. PennyMac Financial Services has raised its dividend for 2 consecutive years.

Analyst Ratings

This is a summary of current recommendations for Berkshire Hills Bancorp and PennyMac Financial Services, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Berkshire Hills Bancorp 0 2 3 0 2.60
PennyMac Financial Services 1 1 4 0 2.50

Berkshire Hills Bancorp presently has a consensus price target of $40.38, indicating a potential upside of 2.74%. PennyMac Financial Services has a consensus price target of $20.33, indicating a potential downside of 4.76%. Given Berkshire Hills Bancorp’s stronger consensus rating and higher possible upside, equities analysts plainly believe Berkshire Hills Bancorp is more favorable than PennyMac Financial Services.

Risk and Volatility

Berkshire Hills Bancorp has a beta of 0.68, indicating that its share price is 32% less volatile than the S&P 500. Comparatively, PennyMac Financial Services has a beta of 0.68, indicating that its share price is 32% less volatile than the S&P 500.

Insider & Institutional Ownership

66.3% of Berkshire Hills Bancorp shares are owned by institutional investors. Comparatively, 90.8% of PennyMac Financial Services shares are owned by institutional investors. 1.7% of Berkshire Hills Bancorp shares are owned by insiders. Comparatively, 45.6% of PennyMac Financial Services shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Profitability

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

Net Margins Return on Equity Return on Assets
Berkshire Hills Bancorp 15.54% 6.93% 0.87%
PennyMac Financial Services 6.47% 4.11% 1.06%

Valuation & Earnings

This table compares Berkshire Hills Bancorp and PennyMac Financial Services’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Berkshire Hills Bancorp $346.29 million 5.14 $58.67 million $1.85 21.24
PennyMac Financial Services $931.89 million 0.53 $66.07 million $2.62 8.15

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

Summary

PennyMac Financial Services beats Berkshire Hills Bancorp on 9 of the 16 factors compared between the two stocks.

Berkshire Hills Bancorp Company Profile

Berkshire Hills Bancorp, Inc. (Berkshire) is a holding company for Berkshire Bank (the Bank) and Berkshire Insurance Group. Berkshire offers a range of deposit, lending, insurance and wealth management products to retail, commercial, not-for-profit and municipal customers in its market areas. Berkshire product offerings also include retail and commercial electronic banking, commercial cash management and commercial interest rate swaps. The Bank’s loan portfolio consists of commercial loans, which include residential mortgages, commercial real estate, commercial and industrial loans, and consumer loans. The Bank’s securities available for sale include municipal bonds and obligations, mortgage-backed securities, other bonds and obligations, and marketable equity securities. As of October 16, 2017, the Bank had 113 full service branch offices in Massachusetts, New York, Connecticut, Vermont, New Jersey and Pennsylvania.

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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