Financial Survey: Fiserv (NASDAQ:FISV) versus PennyMac Financial Services (NYSE:PFSI)

Fiserv (NASDAQ:FISV) and PennyMac Financial Services (NYSE:PFSI) are both finance companies, but which is the superior business? We will compare the two companies based on the strength of their valuation, analyst recommendations, risk, dividends, earnings, institutional ownership and profitability.

Risk and Volatility

Fiserv has a beta of 0.82, indicating that its stock price is 18% less volatile than the S&P 500. Comparatively, PennyMac Financial Services has a beta of 1.44, indicating that its stock price is 44% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Fiserv	15.17%	17.46%	5.59%
PennyMac Financial Services	17.74%	11.21%	1.66%

Insider and Institutional Ownership

91.0% of Fiserv shares are owned by institutional investors. Comparatively, 57.9% of PennyMac Financial Services shares are owned by institutional investors. 0.1% of Fiserv shares are owned by company insiders. Comparatively, 15.8% of PennyMac Financial Services shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current recommendations for Fiserv and PennyMac Financial Services, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Fiserv	3	26	6	0	2.09
PennyMac Financial Services	2	4	4	0	2.20

Fiserv currently has a consensus price target of $76.57, indicating a potential upside of 41.95%. PennyMac Financial Services has a consensus price target of $104.88, indicating a potential upside of 38.91%. Given Fiserv’s higher probable upside, analysts clearly believe Fiserv is more favorable than PennyMac Financial Services.

Earnings and Valuation

This table compares Fiserv and PennyMac Financial Services”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Fiserv	$21.19 billion	1.36	$3.48 billion	$5.90	9.14
PennyMac Financial Services	$4.32 billion	0.91	$501.08 million	$7.28	10.37

Fiserv has higher revenue and earnings than PennyMac Financial Services. Fiserv 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

Fiserv beats PennyMac Financial Services on 8 of the 14 factors compared between the two stocks.

About Fiserv

Fiserv, Inc., together with its subsidiaries, provides payments and financial services technology services in the United States, Europe, the Middle East and Africa, Latin America, the Asia-Pacific, and internationally. It operates through Merchant Acceptance, Financial Technology, and Payments and Network segments. The Merchant Acceptance segment provides merchant acquiring and digital commerce services; mobile payment services; security and fraud protection products; Clover, a cloud based POS and integrated commerce operating system for small and mid-sized businesses and independent software vendors; and Carat, an integrated operating system for large businesses. This segment distributes through various channels, including direct sales teams, strategic partnerships with agent sales forces, independent software vendors, financial institutions, and other strategic partners in the form of joint venture alliances, revenue sharing alliances, and referral agreement. The Financial Technology segment offers customer deposit and loan accounts, as well as manages an institution's general ledger and central information files. This segment also provides digital banking, financial and risk management, professional services and consulting, check processing, and other products and services. The Payments and Network segment offers card transactions, such as debit, credit, and prepaid card processing and services; funds access, debit payments, cardless ATM access, and surcharge-free ATM network; security and fraud protection products; card production; print services; and various network services, as well as non-card digital payment software and services, including bill payment, account-to-account transfers, person-to-person payments, electronic billing, and security and fraud protection products. It serves merchants, banks, credit unions, other financial institutions, and corporate clients. Fiserv, Inc. was incorporated in 1984 and is headquartered in Milwaukee, Wisconsin.

About PennyMac Financial Services

PennyMac Financial Services, Inc., through its subsidiaries, engages in the mortgage banking and investment management activities in the United States. The company operates through three segments: Production, Servicing, and Investment Management. The Production segment is involved in the origination, acquisition, and sale of loans. This segment sources residential conventional and government-insured or guaranteed mortgage loans through correspondent production, consumer direct lending, and broker direct lending. The Servicing segment performs loan servicing for both newly originated loans that are under holding for sale and loans services for others. The segment performs loan administration, collection, and default management activities, including the collection and remittance of loan payments; responds to customer inquiries; provides accounting for principal and interest; holds custodial funds for the payment of property taxes and insurance premiums; counsels delinquent borrowers; and supervising foreclosures and property dispositions, as well as administers loss mitigation activities, such as modification and forbearance programs. The Investment Management segment is involved in sourcing, performing diligence, bidding, and closing investment asset acquisitions; managing correspondent production activities for PennyMac Mortgage Investment Trust; and managing acquired assets. The company was founded in 2008 and is headquartered in Westlake Village, California.