New York Community Bancorp, Inc. (NYSE:NYCB) shares are down more than -17.67% this year and recently decreased -0.74% or -$0.08 to settle at $10.72. MetLife, Inc. (NYSE:MET), on the other hand, is down -8.78% year to date as of 08/09/2018. It currently trades at $46.12 and has returned -0.15% during the past week.
New York Community Bancorp, Inc. (NYSE:NYCB) and MetLife, Inc. (NYSE:MET) are the two most active stocks in the Savings & Loans industry based on today’s trading volumes. Investor interest in the two stocks is clearly very high, but which is the better investment? To answer this question, we will compare the two companies across growth, profitability, risk, and valuation metrics, and also examine their analyst ratings and insider activity trends.Growth
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Comparatively, MET is expected to grow at a 12.55% annual rate. All else equal, MET’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. EBITDA margin of 8.13% for MetLife, Inc. (MET). NYCB’s ROI is 12.40% while MET has a ROI of 7.50%. The interpretation is that NYCB’s business generates a higher return on investment than MET’s.Cash Flow
Cash is king when it comes to investing. On a percent-of-sales basis, NYCB’s free cash flow was 0% while MET converted 0% of its revenues into cash flow. This means that, for a given level of sales, NYCB is able to generate more free cash flow for investors.Financial Risk
NYCB’s debt-to-equity ratio is 0.06 versus a D/E of 0.34 for MET. MET is therefore the more solvent of the two companies, and has lower financial risk.
NYCB trades at a forward P/E of 12.90, a P/B of 0.83, and a P/S of 3.28, compared to a forward P/E of 8.43, a P/B of 0.85, and a P/S of 0.69 for MET. NYCB is the cheaper of the two stocks on book value basis but is expensive in terms of P/E and P/S ratio. 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. NYCB is currently priced at a -8.77% to its one-year price target of 11.75. Comparatively, MET is -13.6% relative to its price target of 53.38. This suggests that MET is the better investment over the next year.
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. NYCB has a beta of 0.61 and MET’s beta is 1.22. NYCB’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. NYCB has a short ratio of 9.84 compared to a short interest of 2.64 for MET. This implies that the market is currently less bearish on the outlook for MET.Summary
MetLife, Inc. (NYSE:MET) beats New York Community Bancorp, Inc. (NYSE:NYCB) on a total of 7 of the 14 factors compared between the two stocks. MET generates a higher return on investment and is more profitable. In terms of valuation, MET is the cheaper of the two stocks on an earnings and sales basis, MET is more undervalued relative to its price target. Finally, MET has better sentiment signals based on short interest.