Financial Contrast: HSBC (HSBC) & Provident Financial Services (PFS)

HSBC (NYSE:HSBC) and Provident Financial Services (NYSE:PFS) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their profitability, institutional ownership, valuation, earnings, dividends, risk and analyst recommendations.

Earnings and Valuation

This table compares HSBC and Provident Financial Services’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
HSBC $53.78 billion 3.21 $12.70 billion $3.15 13.73
Provident Financial Services $418.51 million 4.30 $118.39 million $1.82 14.85

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

Profitability

This table compares HSBC and Provident Financial Services’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
HSBC N/A 6.45% 0.48%
Provident Financial Services 28.29% 8.92% 1.22%

Institutional and Insider Ownership

2.5% of HSBC shares are held by institutional investors. Comparatively, 67.8% of Provident Financial Services shares are held by institutional investors. 3.0% of Provident Financial Services shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Dividends

HSBC pays an annual dividend of $1.50 per share and has a dividend yield of 3.5%. Provident Financial Services pays an annual dividend of $0.92 per share and has a dividend yield of 3.4%. HSBC pays out 47.6% of its earnings in the form of a dividend. Provident Financial Services pays out 50.5% 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. Provident Financial Services has raised its dividend for 8 consecutive years. HSBC is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk and Volatility

HSBC has a beta of 0.65, meaning that its share price is 35% less volatile than the S&P 500. Comparatively, Provident Financial Services has a beta of 0.56, meaning that its share price is 44% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for HSBC and Provident Financial Services, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
HSBC 8 4 0 0 1.33
Provident Financial Services 0 2 1 0 2.33

HSBC currently has a consensus price target of $40.59, suggesting a potential downside of 6.15%. Provident Financial Services has a consensus price target of $25.75, suggesting a potential downside of 4.70%. Given Provident Financial Services’ stronger consensus rating and higher possible upside, analysts plainly believe Provident Financial Services is more favorable than HSBC.

Summary

Provident Financial Services beats HSBC on 11 of the 17 factors compared between the two stocks.

About HSBC

HSBC Holdings plc provides banking and financial products and services. The company operates through Retail Banking and Wealth Management, Commercial Banking, Global Banking and Markets, and Global Private Banking segments. The Retail Banking and Wealth Management segment offers personal banking products and services, mortgages and loans, credit cards, insurance and investment products, savings products, international services, and wealth solutions and financial planning services, as well as telephone, Internet, and mobile banking services. The Commercial Banking segment provides services and financing for buyers and suppliers in the trade cycle; liquidity and cash management services; capital financing, including debt, equity, and advisory services; and insurance and investment products, such as business and financial protection, trade insurance, employee benefits, corporate wealth management, and other commercial risk insurance products to small enterprises, mid-market companies, and multinationals. The Global Banking and Markets segment is involved in the provision of advisory, financing, prime, research and analysis, securities, trading and sales, and transaction banking services to corporates, financial institutions, and resources and energy groups. The Global Private Banking segment provides private banking, and investment and wealth management services to business owners, entrepreneurs, and senior executives and their families. As of January 14, 2019, the company operated approximately 3,800 offices in 66 countries and territories worldwide. HSBC Holdings plc was founded in 1865 and is headquartered in London, the United Kingdom.

About Provident Financial Services

Provident Financial Services, Inc. operates as the holding company for Provident Bank that provides various banking services to individuals, families, and businesses in the United States. The company's deposit products include savings, checking, interest-bearing checking, money market deposit, and certificate of deposit accounts, as well as IRA, and KEOGH products. Its loan portfolio comprises commercial real estate loans that are secured by properties, such as multi-family apartment buildings, office buildings, and retail and industrial properties; commercial business loans; fixed-rate and adjustable-rate mortgage loans collateralized by one- to four-family residential real estate properties; commercial construction loans; and consumer loans consisting of home equity loans, home equity lines of credit, and marine loans. The company also offers cash management, remote deposit capture, payroll origination, escrow account management, and online and mobile banking services; and business credit cards. In addition, it provides trust and estate administration services; and asset management services comprising investment management, asset allocation, trust and estate administration, financial planning, tax compliance and planning, and family office services to individuals, municipalities, non-profits, corporations, and pension funds. Further, the company sells insurance and investment products, including annuities; operates as a real estate investment trust for acquiring mortgage loans and other real estate related assets; and manages and sells real estate properties acquired through foreclosure. As of December 31, 2018, it operated 84 full-service branch offices in northern and central New Jersey, as well as in Pennsylvania. The company was founded in 1839 and is headquartered in Jersey City, New Jersey.

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