PennyMac Financial Services (PFSI) versus Ditech (DHCP) Financial Contrast

Ditech (NYSE:DHCP) and PennyMac Financial Services (NYSE:PFSI) are both small-cap finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their institutional ownership, profitability, analyst recommendations, dividends, earnings, risk and valuation.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Ditech and PennyMac Financial Services, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ditech 0 0 0 0 N/A
PennyMac Financial Services 0 2 3 0 2.60

PennyMac Financial Services has a consensus price target of $24.25, indicating a potential upside of 21.74%. Given PennyMac Financial Services’ higher probable upside, analysts clearly believe PennyMac Financial Services is more favorable than Ditech.

Valuation & Earnings

This table compares Ditech and PennyMac Financial Services’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ditech $831.26 million 0.01 -$426.89 million N/A N/A
PennyMac Financial Services $955.46 million 0.52 $100.75 million $2.20 9.05

PennyMac Financial Services has higher revenue and earnings than Ditech.

Profitability

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

Net Margins Return on Equity Return on Assets
Ditech N/A N/A N/A
PennyMac Financial Services 11.03% 3.91% 0.99%

Insider and Institutional Ownership

39.0% of Ditech shares are held by institutional investors. Comparatively, 90.4% of PennyMac Financial Services shares are held by institutional investors. 32.0% of Ditech shares are held by company insiders. Comparatively, 45.6% of PennyMac Financial Services shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Summary

PennyMac Financial Services beats Ditech on 10 of the 10 factors compared between the two stocks.

Ditech Company Profile

Ditech Holding Corporation operates as an independent servicer and originator of mortgage loans, and servicer of reverse mortgage loans. The company operates through three segments: Servicing, Originations, and Reverse Mortgage. The Servicing segment performs servicing for mortgage loan portfolio, on behalf of third-party credit owners of mortgage loans, as well as performs subservicing for third-party owners. This segment also operates complementary businesses, including asset receivables management that performs collections of post charge-off deficiency balances for third parties; and holds the assets and mortgage-backed debt of the Residual Trusts. The Originations segment originates and purchases mortgage loans through consumer originations, and correspondents and wholesale lendings. The Reverse Mortgage segment primarily focuses on the servicing of its own reverse loans and subservicing on behalf of third-party credit owners of reverse loans. This segment also provides complementary services for the reverse mortgage market, such as real estate owned property management and disposition. It serves government-sponsored entities, government agencies, third-party securitization trusts, and other credit owners. The company was formerly known as Walter Investment Management Corp. and changed its name to Ditech Holding Corporation in February 2018. Ditech Holding Corporation was founded in 1958 and is based in Fort Washington, Pennsylvania.

PennyMac Financial Services Company Profile

PennyMac Financial Services, Inc., through its subsidiaries, engages in the mortgage banking and investment management activities in the United States. It operates through three segments: Loan Production, Loan Servicing, and Investment Management. The Loan Production segment is involved in the origination, acquisition, and sale of mortgage loans. This segment originates first-lien residential conventional and government-insured or guaranteed mortgage loans to allow customers to purchase or refinance their homes. The Loan Servicing segment engages in the servicing of newly originated mortgage loans, and execution and management of early buyout loans. It performs loan administration, collection, and default management activities, including the collection and remittance of loan payments; response to customer inquiries; accounting for principal and interest; holding custodial funds for the payment of property taxes and insurance premiums; counseling delinquent mortgagors; and supervising foreclosures and property dispositions. This segment also services conventional and government-insured or guaranteed loans; and distressed mortgage loans that have been acquired as investments by its advised entities. 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 the acquired assets for the advised entities. PennyMac Financial Services, Inc. was founded in 2008 and is based in Westlake Village, California.

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