Critical Analysis: Onity Group (NYSE:ONIT) and PennyMac Financial Services (NYSE:PFSI)

Onity Group (NYSE:ONIT) and PennyMac Financial Services (NYSE:PFSI) are both finance companies, but which is the superior investment? We will compare the two companies based on the strength of their profitability, analyst recommendations, risk, institutional ownership, dividends, valuation and earnings.

Valuation and Earnings

This table compares Onity Group and PennyMac Financial Services”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Onity Group	$1.07 billion	0.22	-$63.70 million	($0.09)	-334.78
PennyMac Financial Services	$2.01 billion	2.53	$144.66 million	$2.88	34.72

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

Risk & Volatility

Onity Group has a beta of 1.84, indicating that its share price is 84% more volatile than the S&P 500. Comparatively, PennyMac Financial Services has a beta of 1.77, indicating that its share price is 77% more volatile than the S&P 500.

Profitability

This table compares Onity Group and PennyMac Financial Services’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Onity Group	0.16%	15.54%	0.52%
PennyMac Financial Services	13.13%	12.69%	2.30%

Analyst Recommendations

This is a breakdown of current ratings and price targets for Onity Group and PennyMac Financial Services, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Onity Group	0	0	1	1	3.50
PennyMac Financial Services	0	2	4	0	2.67

Onity Group presently has a consensus price target of $35.00, indicating a potential upside of 16.16%. PennyMac Financial Services has a consensus price target of $114.33, indicating a potential upside of 14.33%. Given Onity Group’s stronger consensus rating and higher possible upside, equities analysts plainly believe Onity Group is more favorable than PennyMac Financial Services.

Insider & Institutional Ownership

70.2% of Onity Group shares are held by institutional investors. Comparatively, 57.9% of PennyMac Financial Services shares are held by institutional investors. 7.6% of Onity Group shares are held by insiders. Comparatively, 16.6% of PennyMac Financial Services shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Summary

PennyMac Financial Services beats Onity Group on 9 of the 15 factors compared between the two stocks.

About Onity Group

Onity Group Inc., a financial services company, originates and services mortgage loans in the United States, the United States Virgin Islands, India, and the Philippines. It operates through, Servicing and Originations segments. The company provides commercial forward mortgage loan servicing, reverse mortgage servicing, special servicing, and asset management services for to owners of mortgage loans and foreclosed real estate, as well as residential mortgage loan servicing, such as forward and reverse conventional, government-insured, and non-agency loans, including the reverse mortgage loans classified as loans. It also originates and purchases conventional and government-insured residential forward and reverse mortgage loans through its correspondent lending arrangements, broker relationships, and retail channels. It serves primarily under the PHH Mortgage and Liberty Reverse Mortgage brands. The company was formerly known as Ocwen Financial Corporation and changed its name to Onity Group Inc. in June 2024. Onity Group Inc. was founded in 1988 and is headquartered in West Palm Beach, Florida.

About PennyMac Financial Services

PennyMac Financial Services, Inc., through its subsidiaries, engages in the mortgage banking and investment management activities in the United States. The company operates through three segments: Production, Servicing, and Investment Management. The Production segment is involved in the origination, acquisition, and sale of loans. This segment sources residential conventional and government-insured or guaranteed mortgage loans through correspondent production, consumer direct lending, and broker direct lending. The Servicing segment performs loan servicing for both newly originated loans that are under holding for sale and loans services for others. The segment performs loan administration, collection, and default management activities, including the collection and remittance of loan payments; responds to customer inquiries; provides accounting for principal and interest; holds custodial funds for the payment of property taxes and insurance premiums; counsels delinquent borrowers; and supervising foreclosures and property dispositions, as well as administers loss mitigation activities, such as modification and forbearance programs. The Investment Management segment is involved in sourcing, performing diligence, bidding, and closing investment asset acquisitions; managing correspondent production activities for PennyMac Mortgage Investment Trust; and managing acquired assets. The company was founded in 2008 and is headquartered in Westlake Village, California.