Critical Review: Provident Financial (PROV) and E*TRADE Financial (ETFC)

E*TRADE Financial (NASDAQ: ETFC) and Provident Financial (NASDAQ:PROV) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, analyst recommendations, profitability, institutional ownership, valuation, earnings and dividends.

Insider and Institutional Ownership

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92.6% of E*TRADE Financial shares are owned by institutional investors. Comparatively, 61.0% of Provident Financial shares are owned by institutional investors. 0.1% of E*TRADE Financial shares are owned by insiders. Comparatively, 12.7% of Provident Financial shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Volatility and Risk

E*TRADE Financial has a beta of 1.19, meaning that its stock price is 19% more volatile than the S&P 500. Comparatively, Provident Financial has a beta of -0.01, meaning that its stock price is 101% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for E*TRADE Financial and Provident Financial, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
E*TRADE Financial	0	2	12	1	2.93
Provident Financial	0	2	0	0	2.00

E*TRADE Financial presently has a consensus target price of $66.80, indicating a potential upside of 10.63%. Provident Financial has a consensus target price of $19.50, indicating a potential upside of 5.81%. Given E*TRADE Financial’s stronger consensus rating and higher possible upside, research analysts clearly believe E*TRADE Financial is more favorable than Provident Financial.

Profitability

This table compares E*TRADE Financial and Provident Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
E*TRADE Financial	29.13%	13.39%	1.32%
Provident Financial	3.30%	4.91%	0.51%

Dividends

Provident Financial pays an annual dividend of $0.56 per share and has a dividend yield of 3.0%. E*TRADE Financial does not pay a dividend. Provident Financial pays out 80.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Provident Financial has raised its dividend for 7 consecutive years.

Earnings and Valuation

This table compares E*TRADE Financial and Provident Financial’s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
E*TRADE Financial	$2.37 billion	6.73	$614.00 million	$2.19	27.57
Provident Financial	$64.61 million	2.13	$5.20 million	$0.70	26.33

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

Summary

E*TRADE Financial beats Provident Financial on 14 of the 18 factors compared between the two stocks.

About E*TRADE Financial

E*TRADE Financial Corporation, a financial services company, provides brokerage and related products and services primarily to individual retail investors under the E*TRADE Financial brand. It also offers investor-focused banking products, primarily sweep deposits to retail investors; Federal Deposit Insurance Corporation insurance services; clearing and settlement services; investment advisory services; and financial corporate services, such as software and services for managing equity compensation plans to its corporate clients. The company provides its services to customers through digital platforms; and a network of industry-licensed customer service representatives and financial consultants through phone, email, and online at two national financial centers, as well as in person through 30 regional financial centers in the United States. E*TRADE Financial Corporation was founded in 1982 and is headquartered in New York, New York.

About Provident Financial

Provident Financial Holdings, Inc. operates as the holding company for Provident Savings Bank, F.S.B. that provides community and mortgage banking services to consumers and small to mid-sized businesses in the Inland Empire region of Southern California. It operates through two segments, Provident Bank and Provident Bank Mortgage. The company's deposit products include non-interest-bearing and interest-bearing checking accounts, savings accounts, money market accounts, and time deposits; and loan portfolio comprises single-family, multi-family, commercial real estate, construction, commercial business, consumer, and other mortgage loans. It also originates, purchases, and sells single-family mortgage loans, including second mortgages and equity lines of credit. In addition, the company offers investment services comprising the sale of investment products, such as annuities and mutual funds, as well as trustee services for real estate transactions. It operates 13 full-service banking offices in Riverside County and 1 full-service banking office in San Bernardino County. The company was founded in 1956 and is headquartered in Riverside, California.