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

Institutional & Insider Ownership

18.5% of Porter Bancorp shares are owned by institutional investors. Comparatively, 90.8% of PennyMac Financial Services shares are owned by institutional investors. 28.0% of Porter 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 hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Profitability

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

Net Margins Return on Equity Return on Assets
Porter Bancorp -3.65% -4.42% -0.16%
PennyMac Financial Services 6.47% 4.11% 1.06%

Volatility and Risk

Porter Bancorp has a beta of 1.51, suggesting that its share price is 51% more volatile than the S&P 500. Comparatively, PennyMac Financial Services has a beta of 0.68, suggesting that its share price is 32% less volatile than the S&P 500.

Analyst Ratings

This is a summary of current recommendations and price targets for Porter Bancorp and PennyMac Financial Services, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Porter Bancorp 0 0 0 0 N/A
PennyMac Financial Services 0 1 5 0 2.83

PennyMac Financial Services has a consensus target price of $22.67, indicating a potential upside of 3.50%. Given PennyMac Financial Services’ higher probable upside, analysts clearly believe PennyMac Financial Services is more favorable than Porter Bancorp.

Valuation and Earnings

This table compares Porter 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
Porter Bancorp $40.37 million 1.72 -$2.75 million ($0.24) -62.04
PennyMac Financial Services $931.89 million 0.55 $66.07 million $1.92 11.41

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

Summary

PennyMac Financial Services beats Porter Bancorp on 10 of the 12 factors compared between the two stocks.

Porter Bancorp Company Profile

Porter Bancorp, Inc. is a bank holding company. The Company operates through its subsidiary, PBI Bank (the Bank). The Bank is a community bank with a range of commercial and personal banking products. It offers retail and commercial deposit products. It offers drive-in banking facilities, automatic teller machines, night depository, personalized checks, credit cards, debit cards, Internet banking, mobile banking, treasury management services, remote deposit services, electronic funds transfers through automated clearing house services, domestic and foreign wire transfers, cash management, vault services, and loan and deposit sweep accounts. It operates banking offices in approximately 12 counties in Kentucky. Its markets include metropolitan Louisville in Jefferson County and the surrounding counties of Henry and Bullitt. It serves south central Kentucky and southern Kentucky from banking offices in Butler, Green, Hart, Edmonson, Barren, Warren, Ohio and Daviess Counties.

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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