Analyzing LendingClub (LC) and Stonegate Mortgage (SGM)

LendingClub (NYSE: LC) and Stonegate Mortgage (NYSE:SGM) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their analyst recommendations, institutional ownership, valuation, earnings, risk, profitability and dividends.

Volatility & Risk

LendingClub has a beta of 1.6, suggesting that its stock price is 60% more volatile than the S&P 500. Comparatively, Stonegate Mortgage has a beta of 1.45, suggesting that its stock price is 45% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current recommendations for LendingClub and Stonegate Mortgage, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
LendingClub 0 6 9 0 2.60
Stonegate Mortgage 0 0 0 0 N/A

LendingClub currently has a consensus price target of $6.95, indicating a potential upside of 63.45%. Given LendingClub’s higher possible upside, analysts plainly believe LendingClub is more favorable than Stonegate Mortgage.

Institutional and Insider Ownership

86.8% of LendingClub shares are owned by institutional investors. Comparatively, 44.3% of Stonegate Mortgage shares are owned by institutional investors. 9.7% of LendingClub shares are owned by company insiders. Comparatively, 44.5% of Stonegate Mortgage shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares LendingClub and Stonegate Mortgage’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
LendingClub $495.47 million 3.56 -$145.96 million ($0.23) -18.48
Stonegate Mortgage N/A N/A N/A $1.16 6.89

Stonegate Mortgage has lower revenue, but higher earnings than LendingClub. LendingClub is trading at a lower price-to-earnings ratio than Stonegate Mortgage, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares LendingClub and Stonegate Mortgage’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
LendingClub -17.19% -9.06% -1.73%
Stonegate Mortgage -13.22% -6.70% -1.57%

About LendingClub

LendingClub Corporation provides online marketplace to connect borrowers and investors. Consumers and small business owners borrow through Lending Club. Investors use Lending Club to earn risk-adjusted returns from an asset class that has been closed to many investors and only available on a limited basis to large institutional investors. Its technology automates aspects of operations, including the borrower application process, data gathering, credit decisioning and scoring, loan funding, investing and servicing, regulatory compliance and fraud detection. Its platform offers analytical tools and data to enable investors to make decisions and assess their portfolios. Its technology platform has allowed it to expand its offerings from personal loans to include small business loans, and to expand investor classes from individuals to institutions and create various investment vehicles.

About Stonegate Mortgage

Stonegate Mortgage Corporation is a non-bank mortgage company. The Company is focused on originating, financing and servicing the United States residential mortgage loans. The Company’s segments include Originations, Servicing, Financing and Other. The Originations segment primarily originates and sells residential mortgage loans, which conform to the underwriting guidelines of the government sponsored enterprises and government agencies, and non-agency whole loan investors. The Servicing segment includes loan administration, collection and default activities, including the collection and remittance of loan payments, responding to customer inquiries, collection of principal and interest payments, holding custodial funds for the payment of property taxes and insurance premiums, counseling delinquent mortgagors and modifying loans. The Financing segment includes warehouse-lending activities to correspondent customers by the Company’s subsidiary, NattyMac, LLC.

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