Critical Survey: Freddie Mac (OTCMKTS:FMCC) versus First Hawaiian (NASDAQ:FHB)

First Hawaiian (NASDAQ:FHB) and Freddie Mac (OTCMKTS:FMCC) are both mid-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, analyst recommendations, institutional ownership, risk, valuation, dividends and profitability.

Analyst Ratings

This is a summary of recent recommendations for First Hawaiian and Freddie Mac, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First Hawaiian	2	7	2	0	2.00
Freddie Mac	1	2	1	1	2.40

First Hawaiian currently has a consensus price target of $29.38, indicating a potential upside of 16.29%. Freddie Mac has a consensus price target of $11.12, indicating a potential upside of 180.23%. Given Freddie Mac’s stronger consensus rating and higher probable upside, analysts plainly believe Freddie Mac is more favorable than First Hawaiian.

Insider and Institutional Ownership

97.6% of First Hawaiian shares are held by institutional investors. 0.7% of First Hawaiian shares are held by insiders. Comparatively, 0.1% of Freddie Mac shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares First Hawaiian and Freddie Mac”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First Hawaiian	$1.17 billion	2.63	$276.27 million	$2.30	10.98
Freddie Mac	$129.82 billion	0.02	$10.73 billion	$0.01	397.00

Freddie Mac has higher revenue and earnings than First Hawaiian. First Hawaiian is trading at a lower price-to-earnings ratio than Freddie Mac, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

First Hawaiian has a beta of 0.76, suggesting that its stock price is 24% less volatile than the S&P 500. Comparatively, Freddie Mac has a beta of 1.74, suggesting that its stock price is 74% more volatile than the S&P 500.

Profitability

This table compares First Hawaiian and Freddie Mac’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First Hawaiian	24.41%	10.27%	1.19%
Freddie Mac	9.58%	-90.29%	0.37%

Summary

First Hawaiian beats Freddie Mac on 8 of the 15 factors compared between the two stocks.

About First Hawaiian

First Hawaiian, Inc. operates as a bank holding company for First Hawaiian Bank that provides a range of banking products and services to consumer and commercial customers in the United States. It operates in three segments: Retail Banking, Commercial Banking, and Treasury and Other. The company offers various deposit products, including checking, savings, and time deposit accounts, and other deposit accounts. It also provides residential and commercial mortgage loans, home equity lines of credit and loans, automobile loans and leases, secured and unsecured lines of credit, installment loans, small business loans and leases, and construction lending, as well as commercial lease and auto dealer financing. In addition, the company offers wealth management, personal installment, individual investment and financial planning, insurance protection, trust and estate, private banking, investment management, retirement planning, and merchant processing services, as well as consumer and commercial credit cards. The company was formerly known as BancWest Corporation and changed its name to First Hawaiian, Inc. in April 2016. First Hawaiian, Inc. was founded in 1858 and is headquartered in Honolulu, Hawaii.

About Freddie Mac

Federal Home Loan Mortgage Corporation operates in the secondary mortgage market in the United States. It operates through two segments, Single-Family and Multifamily. The Single-Family segment purchases, securitizes, and guarantees single-family loans; and manages single-family mortgage credit and market risk, as well as manages mortgage-related investments portfolio, single-family securitization activities, and treasury functions. This segment serves mortgage banking companies, commercial banks, regional banks, community banks, credit unions, housing finance agencies, savings institutions, and non-depository financial institutions. The Multifamily segment engages in the purchase, securitization, and guarantee of multifamily loans; issuance of multifamily K certificates; manages multifamily mortgage credit and market risk; and invests in multifamily loans and mortgage-related securities. It serves banks and other financial institutions, insurance companies, money managers, hedge funds, pension funds, state and local governments, and broker dealers. Federal Home Loan Mortgage Corporation incorporated in 1970 and is headquartered in McLean, Virginia.