KeyCorp (NYSE:KEY) shares are down more than -1.92% this year and recently increased 1.59% or $0.28 to settle at $17.92. Fifth Third Bancorp (NASDAQ:FITB), on the other hand, is up 4.52% year to date as of 11/13/2017. It currently trades at $28.19 and has returned -3.59% during the past week.

KeyCorp (NYSE:KEY) and Fifth Third Bancorp (NASDAQ:FITB) are the two most active stocks in the Regional – Midwest Banks industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.

**Growth**

The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect KEY to grow earnings at a 8.40% annual rate over the next 5 years. Comparatively, FITB is expected to grow at a 7.58% annual rate. All else equal, KEY’s higher growth rate would imply a greater potential for capital appreciation.

**Profitability and Returns**

A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this., compared to an EBITDA margin of 57.72% for Fifth Third Bancorp (FITB). KEY’s ROI is 9.50% while FITB has a ROI of 9.50%. The interpretation is that KEY’s business generates a higher return on investment than FITB’s.

**Cash Flow **

If there’s one thing investors care more about than earnings, it’s cash flow. KEY’s free cash flow (“FCF”) per share for the trailing twelve months was +0.78. Comparatively, FITB’s free cash flow per share was +0.56. On a percent-of-sales basis, KEY’s free cash flow was 15.57% while FITB converted 5.74% of its revenues into cash flow. This means that, for a given level of sales, KEY is able to generate more free cash flow for investors.

**Financial Risk**

KEY’s debt-to-equity ratio is 1.06 versus a D/E of 0.93 for FITB. KEY is therefore the more solvent of the two companies, and has lower financial risk.

**Valuation**

KEY trades at a forward P/E of 11.88, a P/B of 1.35, and a P/S of 4.50, compared to a forward P/E of 13.87, a P/B of 1.35, and a P/S of 4.58 for FITB. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.

**Analyst Price Targets and Opinions**

Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. KEY is currently priced at a -12.93% to its one-year price target of 20.58. Comparatively, FITB is -2.69% relative to its price target of 28.97. This suggests that KEY is the better investment over the next year.

The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.20 for KEY and 3.00 for FITB, which implies that analysts are more bullish on the outlook for FITB.

**Risk and Volatility**

Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. KEY has a beta of 1.08 and FITB’s beta is 1.36. KEY’s shares are therefore the less volatile of the two stocks.

**Insider Activity and Investor Sentiment**

Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment.KEY has a short ratio of 1.06 compared to a short interest of 2.52 for FITB. This implies that the market is currently less bearish on the outlook for KEY.

**Summary**

KeyCorp (NYSE:KEY) beats Fifth Third Bancorp (NASDAQ:FITB) on a total of 11 of the 13 factors compared between the two stocks. KEY is growing fastly, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and higher liquidity. In terms of valuation, KEY is the cheaper of the two stocks on an earnings and sales basis, KEY is more undervalued relative to its price target. Finally, KEY has better sentiment signals based on short interest.