Flagstar Bancorp (NYSE: FBC) and HomeStreet (NASDAQ:HMST) are both finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, risk, earnings, analyst recommendations, valuation, dividends and institutional ownership.

Profitability

This table compares Flagstar Bancorp and HomeStreet’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Flagstar Bancorp 16.52% 10.15% 0.92%
HomeStreet 8.89% 8.10% 0.80%

Analyst Ratings

This is a summary of current recommendations and price targets for Flagstar Bancorp and HomeStreet, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Flagstar Bancorp 0 2 5 0 2.71
HomeStreet 0 3 1 0 2.25

Flagstar Bancorp currently has a consensus target price of $35.25, suggesting a potential downside of 1.21%. HomeStreet has a consensus target price of $29.08, suggesting a potential upside of 4.99%. Given HomeStreet’s higher possible upside, analysts clearly believe HomeStreet is more favorable than Flagstar Bancorp.

Insider and Institutional Ownership

96.3% of Flagstar Bancorp shares are owned by institutional investors. Comparatively, 83.9% of HomeStreet shares are owned by institutional investors. 63.0% of Flagstar Bancorp shares are owned by company insiders. Comparatively, 7.6% of HomeStreet shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares Flagstar Bancorp and HomeStreet’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Flagstar Bancorp $783.00 million 2.60 $149.76 million $2.62 13.62
HomeStreet $525.73 million 1.42 $52.15 million $1.94 14.28

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

Volatility and Risk

Flagstar Bancorp has a beta of 0.82, meaning that its share price is 18% less volatile than the S&P 500. Comparatively, HomeStreet has a beta of 0.06, meaning that its share price is 94% less volatile than the S&P 500.

Summary

Flagstar Bancorp beats HomeStreet on 13 of the 14 factors compared between the two stocks.

Flagstar Bancorp Company Profile

Flagstar Bancorp, Inc. is a savings and loan holding company. The Company’s business is primarily conducted through its principal subsidiary, Flagstar Bank, FSB. It operates through four segments: Community Banking, Mortgage Originations, Mortgage Servicing, and Other. Through Mortgage Originations segment, it originates, acquires and sells one- to four-family residential mortgage loans. The Mortgage Servicing segment includes services and subservices mortgage loans, on a fee basis, for others. The Community Banking segment originates loans, provides deposits and fee based services to consumer, business and mortgage lending customers through its Branch Banking, Business and Commercial Banking, Government Banking, Warehouse Lending and Held-for-Investment Portfolio groups. It offers checking accounts, savings accounts, money market accounts, certificates of deposit and others. Other financial services include lines of credit, revolving credit, inventory and accounts receivable.

HomeStreet Company Profile

HomeStreet, Inc. is a financial services company serving customers primarily in the western United States, including Hawaii. The Company is principally engaged in real estate lending, including mortgage banking activities, and commercial and consumer banking. The Company’s operating segments include Commercial and Consumer Banking, and Mortgage Banking. It provides financial products and services to its commercial and consumer customers through retail deposit branches and commercial lending centers, automated teller machines (ATMs), and online, mobile and telephone banking. The Company originates single family residential mortgage loans for sale in the secondary markets. Its mortgage loans are sold to or securitized by Fannie Mae, The Federal Home Loan Mortgage Corporation (Freddie Mac) or The Government National Mortgage Association (Ginnie Mae), while it retains the right to service these loans. It also provides insurance products and services for consumers and businesses.

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