First Bank (NASDAQ: FRBA) and Walter Investment Management Corp. (NYSE:WAC) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their institutional ownership, dividends, valuation, risk, profitability, earnings and analyst recommendations.

Profitability

This table compares First Bank and Walter Investment Management Corp.’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
First Bank 17.19% N/A N/A
Walter Investment Management Corp. -18.10% -75.98% -0.52%

Dividends

First Bank pays an annual dividend of $0.08 per share and has a dividend yield of 0.7%. Walter Investment Management Corp. does not pay a dividend. First Bank pays out 12.5% of its earnings in the form of a dividend.

Institutional and Insider Ownership

43.3% of First Bank shares are held by institutional investors. Comparatively, 56.5% of Walter Investment Management Corp. shares are held by institutional investors. 46.6% of Walter Investment Management Corp. shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current ratings for First Bank and Walter Investment Management Corp., as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
First Bank 0 0 1 0 3.00
Walter Investment Management Corp. 1 1 0 0 1.50

First Bank currently has a consensus target price of $14.00, indicating a potential upside of 16.18%. Walter Investment Management Corp. has a consensus target price of $1.13, indicating a potential upside of 139.21%. Given Walter Investment Management Corp.’s higher probable upside, analysts plainly believe Walter Investment Management Corp. is more favorable than First Bank.

Volatility & Risk

First Bank has a beta of 0.56, suggesting that its share price is 44% less volatile than the S&P 500. Comparatively, Walter Investment Management Corp. has a beta of 0.6, suggesting that its share price is 40% less volatile than the S&P 500.

Valuation & Earnings

This table compares First Bank and Walter Investment Management Corp.’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
First Bank $31.35 million 5.77 $9.61 million $0.64 18.83
Walter Investment Management Corp. $947.12 million 0.02 -$217.78 million ($5.96) -0.08

First Bank has higher revenue, but lower earnings than Walter Investment Management Corp.. Walter Investment Management Corp. is trading at a lower price-to-earnings ratio than First Bank, indicating that it is currently the more affordable of the two stocks.

Summary

First Bank beats Walter Investment Management Corp. on 9 of the 15 factors compared between the two stocks.

First Bank Company Profile

First Bank is a commercial bank. The Company provides a range of lending, deposit and other financial products and services. It operates through Community Banking segment, which is engaged in providing a range of commercial and retail and related banking services. It offers a range of lending products to meet the needs of its customers located within its market areas, including commercial and industrial loans, commercial real estate loans (including owner-occupied, investor, construction and development and multi-family loans), residential real estate loans, and consumer and other loans. It offers a range of deposit instruments, including non-interest bearing demand deposits (such as checking accounts), interest bearing demand accounts, money market accounts, savings accounts and certificates of deposit. It operates over 10 branches located in Cranbury, Denville, Ewing, Flemington, Hamilton, Lawrence, Somerset, Randolph and Williamstown, New Jersey, and Trevose, Pennsylvania.

Walter Investment Management Corp. Company Profile

Walter Investment Management Corp. is a diversified mortgage banking firm focused primarily on the servicing and origination of residential loans, including reverse loans. The Company operates through three segments: Servicing, Originations and Reverse Mortgage. The Servicing segment consists of operations that perform servicing for third-party credit owners of mortgage loans, as well as its own mortgage loan portfolio. The Servicing segment also includes Insurance, and Loans and Residuals businesses. The Originations segment consists of operations that originate and purchase mortgage loans that are intended for sale to third parties. The Reverse Mortgage segment consists of operations which purchases and originates home equity conversion mortgage that are securitized, but remain on the consolidated balance sheet as collateral for secured borrowings.

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