Critical Survey: HomeStreet (NASDAQ:HMST) & Citizens Financial Group (NYSE:CFG)

HomeStreet (NASDAQ:HMST) and Citizens Financial Group (NYSE:CFG) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their risk, valuation, analyst recommendations, institutional ownership, earnings, profitability and dividends.

Analyst Ratings

This is a summary of recent recommendations for HomeStreet and Citizens Financial Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
HomeStreet	0	3	1	0	2.25
Citizens Financial Group	0	9	7	0	2.44

HomeStreet presently has a consensus price target of $12.00, indicating a potential upside of 7.91%. Citizens Financial Group has a consensus price target of $37.73, indicating a potential upside of 4.67%. Given HomeStreet’s higher probable upside, equities analysts clearly believe HomeStreet is more favorable than Citizens Financial Group.

Institutional and Insider Ownership

74.7% of HomeStreet shares are owned by institutional investors. Comparatively, 94.9% of Citizens Financial Group shares are owned by institutional investors. 4.6% of HomeStreet shares are owned by insiders. Comparatively, 0.6% of Citizens Financial Group shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares HomeStreet and Citizens Financial Group’s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
HomeStreet	$160.81 million	1.30	-$27.51 million	($2.13)	-5.22
Citizens Financial Group	$12.19 billion	1.35	$1.61 billion	$2.76	13.06

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

Risk and Volatility

HomeStreet has a beta of 1.38, meaning that its stock price is 38% more volatile than the S&P 500. Comparatively, Citizens Financial Group has a beta of 1.1, meaning that its stock price is 10% more volatile than the S&P 500.

Dividends

HomeStreet pays an annual dividend of $0.40 per share and has a dividend yield of 3.6%. Citizens Financial Group pays an annual dividend of $1.68 per share and has a dividend yield of 4.7%. HomeStreet pays out -18.8% of its earnings in the form of a dividend. Citizens Financial Group pays out 60.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Profitability

This table compares HomeStreet and Citizens Financial Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
HomeStreet	-8.97%	-0.43%	-0.02%
Citizens Financial Group	11.52%	6.62%	0.64%

Summary

Citizens Financial Group beats HomeStreet on 12 of the 16 factors compared between the two stocks.

About HomeStreet

HomeStreet, Inc. operates as the bank holding company for HomeStreet Bank that provides commercial, mortgage, and consumer/retail banking services in the Western United States. The company offers personal and business checking, savings, interest-bearing negotiable order of withdrawal, and money market accounts, as well as certificates of deposit; credit cards; insurance; and treasury management services. Its loan products include commercial real estate (CRE), multifamily, construction and land development, owner occupied CRE and commercial business loans; and single family, home equity, and other loans. In addition, the company offers online, mobile, and telephone banking. It serves small and medium sized businesses, real estate investors, professional firms, and individuals. The company operates through branches and ATMs. The company was formerly known as Continental Mortgage and Loan Company. HomeStreet, Inc. was incorporated in 1921 and is headquartered in Seattle, Washington.

About Citizens Financial Group

Citizens Financial Group, Inc. operates as the bank holding company that provides retail and commercial banking products and services to individuals, small businesses, middle-market companies, corporations, and institutions in the United States. The company operates in two segments, Consumer Banking and Commercial Banking. The Consumer Banking segment offers deposit products, mortgage and home equity lending products, credit cards, business loans, wealth management, and investment services; and auto, education, and point-of-sale finance loans, as well as digital deposit products. This segment serves its customers through telephone service centers, as well as through its online and mobile platforms. The Commercial Banking segment provides various financial products and solutions, including lending and leasing, deposit and treasury management services, foreign exchange, and interest rate and commodity risk management solutions, as well as syndicated loans, corporate finance, mergers and acquisitions, and debt and equity capital markets services. This segment serves corporate banking, healthcare, technology, asset finance, franchise finance, leasing, asset-based lending, commercial real estate, mid-corporate, and private equity sponsor industries. The company was formerly known as RBS Citizens Financial Group, Inc. and changed its name to Citizens Financial Group, Inc. in April 2014. Citizens Financial Group, Inc. was founded in 1828 and is headquartered in Providence, Rhode Island.