Financial Contrast: OceanFirst Financial (NASDAQ:OCFC) vs. Flagstar Bancorp (NASDAQ:FBC)

Flagstar Bancorp (NYSE:FBC) and OceanFirst Financial (NASDAQ:OCFC) are both small-cap finance companies, but which is the better business? We will contrast the two companies based on the strength of their earnings, valuation, institutional ownership, risk, profitability, dividends and analyst recommendations.

Valuation and Earnings

This table compares Flagstar Bancorp and OceanFirst Financial’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Flagstar Bancorp $1.12 billion 1.64 $187.00 million $3.02 10.79
OceanFirst Financial $311.48 million 4.14 $71.93 million $1.98 12.72

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

Dividends

Flagstar Bancorp pays an annual dividend of $0.16 per share and has a dividend yield of 0.5%. OceanFirst Financial pays an annual dividend of $0.68 per share and has a dividend yield of 2.7%. Flagstar Bancorp pays out 5.3% of its earnings in the form of a dividend. OceanFirst Financial pays out 34.3% 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. OceanFirst Financial has increased its dividend for 5 consecutive years. OceanFirst Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Flagstar Bancorp and OceanFirst Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Flagstar Bancorp 16.38% 11.60% 0.95%
OceanFirst Financial 26.92% 9.47% 1.29%

Volatility and Risk

Flagstar Bancorp has a beta of 1.23, meaning that its stock price is 23% more volatile than the S&P 500. Comparatively, OceanFirst Financial has a beta of 0.74, meaning that its stock price is 26% less volatile than the S&P 500.

Insider & Institutional Ownership

98.6% of Flagstar Bancorp shares are owned by institutional investors. Comparatively, 68.8% of OceanFirst Financial shares are owned by institutional investors. 49.9% of Flagstar Bancorp shares are owned by company insiders. Comparatively, 3.6% of OceanFirst Financial shares are owned 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.

Analyst Ratings

This is a breakdown of current ratings for Flagstar Bancorp and OceanFirst Financial, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Flagstar Bancorp 0 2 4 0 2.67
OceanFirst Financial 0 1 1 0 2.50

Flagstar Bancorp currently has a consensus price target of $37.00, suggesting a potential upside of 13.50%. OceanFirst Financial has a consensus price target of $28.00, suggesting a potential upside of 11.16%. Given Flagstar Bancorp’s stronger consensus rating and higher probable upside, equities analysts clearly believe Flagstar Bancorp is more favorable than OceanFirst Financial.

Summary

Flagstar Bancorp beats OceanFirst Financial on 11 of the 17 factors compared between the two stocks.

Flagstar Bancorp Company Profile

Flagstar Bancorp, Inc. operates as a savings and loan holding company for Flagstar Bank, FSB that provides commercial and consumer banking services to individuals and businesses in the United States. Its Community Banking segment offers various products, such as checking accounts, savings accounts, money market accounts, certificates of deposit, consumer and commercial loans, commercial real estate loans, equipment finance and leasing, home builder finance loans, and warehouse lines of credit. It also provides other financial services, including consumer and corporate card services, customized treasury management solutions, merchant services, and capital markets services, such as loan syndications, as well as wealth management products and services. This segment serves consumer, business, and mortgage lending customers through its branch banking, business and commercial banking, government banking, warehouse lending, and loans held-for-investment (LHFI) portfolio groups. The company's Mortgage Originations segment originates, acquires, and sells one-to-four family residential mortgage loans through mortgage branches, call centers, the Internet, and third party counterparties. Its Mortgage Servicing segment offers services and subservices mortgage loans; and the servicing of residential mortgages for its LHFI portfolio, as well as noninterest-bearing escrow services. As of December 31, 2018, the company provided banking services through 160 full service banking branches; and home loans through a wholesale network of brokers and correspondents in 50 states, as well as 75 retail locations in 24 states. Flagstar Bancorp, Inc. was founded in 1987 and is headquartered in Troy, Michigan.

OceanFirst Financial Company Profile

OceanFirst Financial Corp. operates as the holding company for OceanFirst Bank N.A. that provides a range of community banking services. The company offers various deposit products to retail, government, and business customers, including money market accounts, savings accounts, interest-bearing checking accounts, non-interest-bearing accounts, and time deposits. It also provides commercial real estate, multi-family mortgage, and land loans; fixed-rate and adjustable-rate mortgage loans that are secured by one-to-four family residences; consumer loans, such as home equity loans and lines of credit, student loans, overdraft line of credit, loans on savings accounts, and other consumer loans; and commercial and industrial loans, and lines of credit. In addition, the company invests in mortgage-backed securities, securities issued by the U.S. Government and agencies, corporate securities, and other investments. Further, it offers bankcard and wealth management services; and sells alternative investment products and life insurance products. The company operates through its branch office in Toms River; administrative office located in Red Bank; and 58 additional branch offices and 3 deposit production facilities located throughout central and southern New Jersey, as well as commercial loan production offices in New York City, the Philadelphia area and Atlantic, Cape May, and Mercer Counties in New Jersey. OceanFirst Financial Corp. was founded in 1902 and is based in Red Bank, New Jersey.

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