Reviewing ESSA Bancorp (NASDAQ:ESSA) & Flagstar Financial (NYSE:FLG)

ESSA Bancorp (NASDAQ:ESSA) and Flagstar Financial (NYSE:FLG) are both finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, risk, institutional ownership, earnings, dividends, analyst recommendations and valuation.

Institutional and Insider Ownership

54.2% of ESSA Bancorp shares are held by institutional investors. Comparatively, 67.9% of Flagstar Financial shares are held by institutional investors. 7.5% of ESSA Bancorp shares are held by insiders. Comparatively, 6.4% of Flagstar Financial shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Profitability

This table compares ESSA Bancorp and Flagstar Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
ESSA Bancorp	15.22%	7.55%	0.77%
Flagstar Financial	-18.40%	-11.35%	-0.78%

Dividends

ESSA Bancorp pays an annual dividend of $0.60 per share and has a dividend yield of 3.1%. Flagstar Financial pays an annual dividend of $0.04 per share and has a dividend yield of 0.4%. ESSA Bancorp pays out 33.7% of its earnings in the form of a dividend. Flagstar Financial pays out -0.9% 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.

Earnings and Valuation

This table compares ESSA Bancorp and Flagstar Financial”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ESSA Bancorp	$111.66 million	1.79	$16.99 million	$1.78	11.05
Flagstar Financial	$8.20 billion	0.47	-$79.00 million	($4.36)	-2.11

ESSA Bancorp has higher earnings, but lower revenue than Flagstar Financial. Flagstar Financial is trading at a lower price-to-earnings ratio than ESSA Bancorp, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

ESSA Bancorp has a beta of 0.4, meaning that its share price is 60% less volatile than the S&P 500. Comparatively, Flagstar Financial has a beta of 1.09, meaning that its share price is 9% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current recommendations and price targets for ESSA Bancorp and Flagstar Financial, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ESSA Bancorp	0	0	0	0	0.00
Flagstar Financial	0	3	0	0	2.00

Flagstar Financial has a consensus target price of $11.50, suggesting a potential upside of 25.14%. Given Flagstar Financial’s stronger consensus rating and higher possible upside, analysts clearly believe Flagstar Financial is more favorable than ESSA Bancorp.

Summary

ESSA Bancorp beats Flagstar Financial on 9 of the 15 factors compared between the two stocks.

About ESSA Bancorp

ESSA Bancorp, Inc. operates as a bank holding company for ESSA Bank & Trust that provides a range of financial services to individuals, families, and businesses in Pennsylvania. The company accepts savings accounts, interest bearing demand accounts, checking accounts, money market accounts, club accounts, certificates of deposit and IRAs, and other qualified plan accounts, as well as commercial checking accounts. It also provides first mortgage loans for the purchase, construction, or refinancing of one- to four-family residential real estate property; commercial real estate loans; home equity loans and lines of credit; auto loans; and commercial and other consumer loans, as well as loans secured by deposits and personal unsecured loans. In addition, the company offers insurance benefits consulting services, such as health insurance, life insurance, short term and long term disability, dental, vision, 401(K) retirement planning, and individual health products, as well as asset management and trust, and investment services. It operates community offices in Monroe County, Lehigh County, Northampton County, Lackawanna County, Luzerne County, Chester County, Delaware County, and Montgomery County. ESSA Bancorp, Inc. was founded in 1916 and is headquartered in Stroudsburg, Pennsylvania.

About Flagstar Financial

Flagstar Financial, Inc. operates as the bank holding company for Flagstar Bank, N.A. that provides banking products and services in the United States. The company’s deposit products include interest-bearing checking and money market, savings, non-interest-bearing, and retirement accounts, as well as certificates of deposit. Its loan products comprise multi-family loans; commercial real estate loans; acquisition, development, and construction loans; commercial and industrial loans; one-to-four family loans; specialty finance loans and leases; warehouse loans; and other loans, such as home equity lines of credit, boat and recreational vehicle indirect lending, point of sale consumer loans, and other consumer loans, including overdraft loans. The company offers cash management products; non-deposit investment and insurance products; and online banking, mobile banking, and bank-by-phone services. It primarily serves individuals, small and mid-size businesses, and professional associations. The company was formerly known as New York Community Bancorp, Inc. and changed its name to Flagstar Financial, Inc. in October 2024. Flagstar Financial, Inc. was founded in 1859 and is headquartered in Hicksville, New York.