Critical Contrast: Live Oak Bancshares (NYSE:LOB) versus Fannie Mae (OTCMKTS:FNMA)

Fannie Mae (OTCMKTS:FNMA) and Live Oak Bancshares (NYSE:LOB) are both finance companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, profitability, valuation, analyst recommendations, dividends, earnings and risk.

Earnings & Valuation

This table compares Fannie Mae and Live Oak Bancshares”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Fannie Mae	$159.17 billion	0.04	$14.36 billion	$0.22	25.27
Live Oak Bancshares	$1.04 billion	1.53	$105.87 million	$2.81	12.24

Fannie Mae has higher revenue and earnings than Live Oak Bancshares. Live Oak Bancshares is trading at a lower price-to-earnings ratio than Fannie Mae, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Fannie Mae and Live Oak Bancshares, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Fannie Mae	1	5	0	0	1.83
Live Oak Bancshares	0	4	2	0	2.33

Fannie Mae presently has a consensus price target of $7.30, suggesting a potential upside of 31.29%. Live Oak Bancshares has a consensus price target of $41.75, suggesting a potential upside of 21.34%. Given Fannie Mae’s higher probable upside, equities analysts plainly believe Fannie Mae is more favorable than Live Oak Bancshares.

Profitability

This table compares Fannie Mae and Live Oak Bancshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Fannie Mae	5.16%	-88.54%	0.52%
Live Oak Bancshares	12.22%	11.56%	0.89%

Volatility and Risk

Fannie Mae has a beta of 1.72, suggesting that its stock price is 72% more volatile than the S&P 500. Comparatively, Live Oak Bancshares has a beta of 1.79, suggesting that its stock price is 79% more volatile than the S&P 500.

Insider and Institutional Ownership

0.0% of Fannie Mae shares are held by institutional investors. Comparatively, 64.0% of Live Oak Bancshares shares are held by institutional investors. 1.0% of Fannie Mae shares are held by insiders. Comparatively, 22.4% of Live Oak Bancshares shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Summary

Live Oak Bancshares beats Fannie Mae on 10 of the 14 factors compared between the two stocks.

About Fannie Mae

Federal National Mortgage Association provides financing solutions for mortgages in the United States. It operates through two segments, Single-Family and Multifamily. The Single-Family segment securitizes and purchases single-family fixed-rate or adjustable-rate, first-lien mortgage loans, or mortgage-related securities backed by these loans; and loans that are insured by Federal Housing Administration, loans guaranteed by the Department of Veterans Affairs and Rural Development Housing and Community Facilities Program of the U.S. Department of Agriculture, manufactured housing mortgage loans, and other mortgage-related securities. The Multifamily segment securitizes multifamily mortgage loans into Fannie Mae mortgage backed securities (MBS); purchases multifamily mortgage loans; and provides credit enhancement for bonds issued by state and local housing finance authorities to finance multifamily housing. This segment also issues structured MBS backed by Fannie Mae multifamily MBS; buys and sells multifamily agency mortgage-backed securities; and invests in low-income housing tax credit multifamily projects. Federal National Mortgage Association was founded in 1938 and is based in Washington, the District of Columbia.

About Live Oak Bancshares

Live Oak Bancshares, Inc. operates as the bank holding company for Live Oak Banking Company that provides various commercial banking products and services to individuals, small businesses, and professionals in North Carolina, the United States. The company accepts various deposit products, including noninterest-bearing demand, as well as interest-bearing checking, money market, savings, and time deposits. It also offers commercial and industrial loans; construction and development loans; owner occupied and non-owner occupied collateral commercial real estate loans; and commercial land loans. In addition, the company provides settlement, accounting, and securitization services for government guaranteed loans; wealth and investment management services to high-net-worth individuals and families; investment advisory services to a series of funds focused on providing venture capital to new and emerging financial technology companies; and an on-site restaurant location to company employees and business visitors. Live Oak Bancshares, Inc. was incorporated in 2008 and is headquartered in Wilmington, North Carolina.