Hilltop (NYSE:HTH) and TFS Financial (NASDAQ:TFSL) Financial Analysis

Hilltop (NYSE:HTH) and TFS Financial (NASDAQ:TFSL) are both mid-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their dividends, institutional ownership, risk, earnings, profitability, analyst recommendations and valuation.

Valuation & Earnings

This table compares Hilltop and TFS Financial”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Hilltop	$1.63 billion	1.27	$165.59 million	$2.40	15.15
TFS Financial	$351.78 million	13.10	$100.72 million	$0.36	45.64

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

Dividends

Hilltop pays an annual dividend of $0.88 per share and has a dividend yield of 2.4%. TFS Financial pays an annual dividend of $1.27 per share and has a dividend yield of 7.7%. Hilltop pays out 36.7% of its earnings in the form of a dividend. TFS Financial pays out 352.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Hilltop has raised its dividend for 8 consecutive years.

Profitability

This table compares Hilltop and TFS Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Hilltop	9.08%	6.51%	0.88%
TFS Financial	12.00%	5.23%	0.57%

Institutional and Insider Ownership

57.1% of Hilltop shares are owned by institutional investors. Comparatively, 9.8% of TFS Financial shares are owned by institutional investors. 5.4% of Hilltop shares are owned by company insiders. Comparatively, 0.7% of TFS Financial shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Hilltop and TFS Financial, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Hilltop	1	3	1	0	2.00
TFS Financial	0	3	1	0	2.25

Hilltop currently has a consensus target price of $42.00, indicating a potential upside of 15.49%. TFS Financial has a consensus target price of $18.00, indicating a potential upside of 9.56%. Given Hilltop’s higher possible upside, analysts clearly believe Hilltop is more favorable than TFS Financial.

Volatility and Risk

Hilltop has a beta of 0.88, meaning that its stock price is 12% less volatile than the S&P 500. Comparatively, TFS Financial has a beta of 0.71, meaning that its stock price is 29% less volatile than the S&P 500.

Summary

Hilltop beats TFS Financial on 11 of the 16 factors compared between the two stocks.

About Hilltop

Hilltop Holdings Inc. provides business and consumer banking services. It operates through three segments: Banking, Broker-Dealer, and Mortgage Origination. The Banking segment offers savings, checking, interest-bearing checking, and money market accounts; certificates of deposit; lines and letters of credit, home improvement and equity loans, loans for purchasing and carrying securities, term, agricultural and commercial real estate, equipment loans, and other lending products; and mortgage, commercial and industrial loans, and term and construction finance. It also provides treasury management, asset management, check cards, safe deposit boxes, online banking, bill pay, and overdraft privilege services; and estate planning, management and administration, investment portfolio management, employee benefit accounts, and individual retirement accounts services, as well as automated teller machines. The Broker-Dealer segment offers public finance services that assist public entities in originating, syndicating, and distributing securities of municipalities and political subdivisions; specialized advisory and investment banking services; advice and guidance to arbitrage rebate compliance, portfolio management, and local government investment pool administration; advisory services and products for derivatives and commodities; agricultural insurance; and sells, trades in, and underwrites U.S. government and government agency bonds, corporate bonds, and municipal bonds; mortgage-backed, asset-backed, and commercial mortgage-backed securities and structured products; and provides asset and liability management advisory, clearing, retail, and securities lending services. The Mortgage Origination segment offers fixed and adjustable rate mortgages, jumbo, new construction, Federal Housing Administration, Veterans Affairs, and United States Department of Agriculture loans. Hilltop Holdings Inc. was incorporated in 1998 and is based in Dallas, Texas.

About TFS Financial

TFS Financial Corporation, through its subsidiaries, provides retail consumer banking services in the United States. Its deposit products include savings, money market, checking, individual retirement, and other qualified plan accounts, as well as certificates of deposit. The company also provides residential real estate mortgage loans, residential construction loans, and home equity loans and lines of credit, as well as purchase mortgages and first mortgage refinance loans. In addition, it offers escrow and settlement services. The company provides its products and services through its main office in Cleveland, Ohio; and multiple full-service branches and loan production offices located throughout the states of Ohio and Florida. TFS Financial Corporation was founded in 1938 and is headquartered in Cleveland, Ohio. TFS Financial Corporation is a subsidiary of Third Federal Savings and Loan Association of Cleveland, MHC.