People’s United Financial (NASDAQ: PBCT) and Ocwen Financial Corporation (NYSE:OCN) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their risk, valuation, earnings, dividends, institutional ownership, profitability and analyst recommendations.

Insider and Institutional Ownership

77.2% of People’s United Financial shares are owned by institutional investors. Comparatively, 48.5% of Ocwen Financial Corporation shares are owned by institutional investors. 2.7% of People’s United Financial shares are owned by insiders. Comparatively, 5.2% of Ocwen Financial Corporation shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Volatility and Risk

People’s United Financial has a beta of 0.84, suggesting that its stock price is 16% less volatile than the S&P 500. Comparatively, Ocwen Financial Corporation has a beta of 1.27, suggesting that its stock price is 27% more volatile than the S&P 500.

Dividends

People’s United Financial pays an annual dividend of $0.69 per share and has a dividend yield of 3.8%. Ocwen Financial Corporation does not pay a dividend. People’s United Financial pays out 77.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ocwen Financial Corporation has raised its dividend for 10 consecutive years.

Analyst Recommendations

This is a breakdown of current ratings for People’s United Financial and Ocwen Financial Corporation, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
People’s United Financial 2 8 0 0 1.80
Ocwen Financial Corporation 0 5 0 0 2.00

People’s United Financial currently has a consensus price target of $18.72, suggesting a potential upside of 2.40%. Ocwen Financial Corporation has a consensus price target of $3.33, suggesting a potential downside of 7.66%. Given People’s United Financial’s higher probable upside, equities analysts plainly believe People’s United Financial is more favorable than Ocwen Financial Corporation.

Valuation & Earnings

This table compares People’s United Financial and Ocwen Financial Corporation’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
People’s United Financial $1.34 billion 4.60 $300.38 million $0.89 20.54
Ocwen Financial Corporation $1.32 billion 0.36 $352.81 million ($0.62) -5.82

Ocwen Financial Corporation has higher revenue, but lower earnings than People’s United Financial. Ocwen Financial Corporation is trading at a lower price-to-earnings ratio than People’s United Financial, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares People’s United Financial and Ocwen Financial Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
People’s United Financial 18.88% 6.14% 0.75%
Ocwen Financial Corporation -5.95% -12.41% -1.01%

Summary

People’s United Financial beats Ocwen Financial Corporation on 9 of the 15 factors compared between the two stocks.

People’s United Financial Company Profile

People’s United Financial, Inc. is a bank holding company and a financial holding company of People’s United Bank (the Bank). The Bank is engaged in providing commercial banking, retail banking and wealth management services to individual, corporate and municipal customers. The Company operates through two segments: Commercial Banking and Retail Banking. Commercial Banking segment is engaged in commercial real estate lending, commercial and industrial lending, and commercial deposit gathering activities. It offers cash management, correspondent banking, municipal banking, institutional trust services, corporate trust, insurance services and private banking, among others. Retail Banking segment provides consumer lending (including residential mortgage and home equity lending) and consumer deposit gathering activities. The Retail Banking segment also includes brokerage, financial advisory services, investment management services, and life insurance and non-institutional trust services.

Ocwen Financial Corporation Company Profile

Ocwen Financial Corporation is a financial services holding company. The Company, through its subsidiaries, originates and services loans. The Company’s segments include Servicing, Lending, and Corporate Items and Other. The Company’s Servicing segment consists of its residential servicing business. The Company’s Lending segment is focused on originating and purchasing conventional and government-insured residential forward and reverse mortgage loans. The Company’s Corporate Items and Other segment includes revenues and expenses of Automotive Capital Services (ACS) and its other business activities. Its servicing clients include some of the financial institutions in the United States, including the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), the Government National Mortgage Association (Ginnie Mae) and non-Agency residential mortgage-backed securities (RMBS) trusts.

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