Analyzing SunTrust Banks (STI) & Washington Federal (WAFD)

SunTrust Banks (NYSE:STI) and Washington Federal (NASDAQ:WAFD) are both finance companies, but which is the superior business? We will compare the two businesses based on the strength of their analyst recommendations, dividends, valuation, risk, earnings, profitability and institutional ownership.

Risk and Volatility

SunTrust Banks has a beta of 1.29, meaning that its share price is 29% more volatile than the S&P 500. Comparatively, Washington Federal has a beta of 1.13, meaning that its share price is 13% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and recommmendations for SunTrust Banks and Washington Federal, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
SunTrust Banks 1 11 13 0 2.48
Washington Federal 0 4 0 0 2.00

SunTrust Banks presently has a consensus target price of $73.74, suggesting a potential upside of 10.12%. Washington Federal has a consensus target price of $36.00, suggesting a potential upside of 12.78%. Given Washington Federal’s higher probable upside, analysts clearly believe Washington Federal is more favorable than SunTrust Banks.

Earnings & Valuation

This table compares SunTrust Banks and Washington Federal’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
SunTrust Banks $9.74 billion 3.17 $2.27 billion $4.04 16.57
Washington Federal $601.13 million 4.44 $173.53 million $1.94 16.45

SunTrust Banks has higher revenue and earnings than Washington Federal. Washington Federal is trading at a lower price-to-earnings ratio than SunTrust Banks, indicating that it is currently the more affordable of the two stocks.

Dividends

SunTrust Banks pays an annual dividend of $2.00 per share and has a dividend yield of 3.0%. Washington Federal pays an annual dividend of $0.72 per share and has a dividend yield of 2.3%. SunTrust Banks pays out 49.5% of its earnings in the form of a dividend. Washington Federal pays out 37.1% 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. SunTrust Banks has raised its dividend for 5 consecutive years and Washington Federal has raised its dividend for 4 consecutive years. SunTrust Banks is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional and Insider Ownership

83.9% of SunTrust Banks shares are held by institutional investors. Comparatively, 84.2% of Washington Federal shares are held by institutional investors. 0.5% of SunTrust Banks shares are held by insiders. Comparatively, 1.1% of Washington Federal shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares SunTrust Banks and Washington Federal’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
SunTrust Banks 26.41% 10.94% 1.19%
Washington Federal 30.99% 9.93% 1.28%

Summary

SunTrust Banks beats Washington Federal on 10 of the 17 factors compared between the two stocks.

About SunTrust Banks

SunTrust Banks, Inc. operates as the holding company for SunTrust Bank that provides various financial services for consumers, businesses, corporations, and institutions in the United States. It operates through two segments, Consumer and Wholesale. The Consumer segment provides deposits and payments; home equity and personal credit lines; auto, student, and other lending products; credit cards; discount/online and full-service brokerage products; professional investment advisory products and services; and trust services, as well as family office solutions. This segment also offers residential mortgage products in the secondary market. The Wholesale segment provides capital markets solutions, including advisory, capital raising, and financial risk management, as well as lease financing solutions; cash management services and auto dealer financing solutions; and construction, mini-perm, and permanent real estate financing, as well as tailored financing and equity investment solutions. This segment also offers treasury and payment solutions, such as operating various electronic and paper payment types, which comprise card, wire transfer, automated clearing house, check, and cash; and provides services clients to manage their accounts online. The company offers its products and services through a network of traditional and in-store branches, automated teller machines, Internet, mobile, and telephone banking channels. As of December 31, 2017, it operated 1,268 full-service banking offices located in Florida, Georgia, Virginia, North Carolina, Tennessee, Maryland, South Carolina, and the District of Columbia. SunTrust Banks, Inc. was founded in 1891 and is headquartered in Atlanta, Georgia.

About Washington Federal

Washington Federal, Inc. operates as the bank holding company for Washington Federal, National Association that provides lending, depository, insurance, and other banking services to consumers, mid-sized and large businesses, and owners and developers of commercial real estate in the United States. The company accepts deposit products, such as business and personal checking accounts, and term certificates of deposit, as well as money market accounts and passbook savings accounts. It also offers single-family residential, construction, land acquisition and development, multi-family residential, commercial and industrial, home equity, and business loans. In addition, the company is involved insurance brokerage activities. As of September 30, 2017, it had 237 branches located in Washington, Oregon, Idaho, Arizona, Utah, Nevada, New Mexico, and Texas. Washington Federal, Inc. was founded in 1917 and is headquartered in Seattle, Washington.

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