Reviewing SunTrust Banks (STI) and Northwest Bancshares (NASDAQ:NWBI)

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SunTrust Banks (NYSE:STI) and Northwest Bancshares (NASDAQ:NWBI) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their earnings, profitability, dividends, institutional ownership, valuation, analyst recommendations and risk.

Profitability

This table compares SunTrust Banks and Northwest Bancshares’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
SunTrust Banks 28.17% 11.66% 1.26%
Northwest Bancshares 21.95% 8.27% 1.06%

Dividends

SunTrust Banks pays an annual dividend of $2.00 per share and has a dividend yield of 3.1%. Northwest Bancshares pays an annual dividend of $0.68 per share and has a dividend yield of 4.0%. SunTrust Banks pays out 49.5% of its earnings in the form of a dividend. Northwest Bancshares pays out 81.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. SunTrust Banks has raised its dividend for 5 consecutive years and Northwest Bancshares has raised its dividend for 2 consecutive years.

Risk and Volatility

SunTrust Banks has a beta of 1.27, indicating that its stock price is 27% more volatile than the S&P 500. Comparatively, Northwest Bancshares has a beta of 0.71, indicating that its stock price is 29% less volatile than the S&P 500.

Institutional and Insider Ownership

84.1% of SunTrust Banks shares are owned by institutional investors. Comparatively, 71.5% of Northwest Bancshares shares are owned by institutional investors. 0.5% of SunTrust Banks shares are owned by company insiders. Comparatively, 2.2% of Northwest Bancshares shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of recent ratings and recommmendations for SunTrust Banks and Northwest Bancshares, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
SunTrust Banks 1 7 13 0 2.57
Northwest Bancshares 0 2 0 0 2.00

SunTrust Banks currently has a consensus target price of $77.07, suggesting a potential upside of 21.32%. Northwest Bancshares has a consensus target price of $17.00, suggesting a potential downside of 1.22%. Given SunTrust Banks’ stronger consensus rating and higher probable upside, analysts clearly believe SunTrust Banks is more favorable than Northwest Bancshares.

Valuation and Earnings

This table compares SunTrust Banks and Northwest Bancshares’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
SunTrust Banks $9.74 billion 2.93 $2.27 billion $4.04 15.73
Northwest Bancshares $469.34 million 3.78 $94.46 million $0.84 20.49

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

Summary

SunTrust Banks beats Northwest Bancshares on 13 of the 17 factors compared between the two stocks.

SunTrust Banks Company Profile

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.

Northwest Bancshares Company Profile

Northwest Bancshares, Inc. operates as a bank holding company for Northwest Savings Bank that offers various personal and business banking solutions in the United States. The company offers personal and business deposits, such as checking, savings, money market deposit, term certificate, and individual retirement accounts. Its loan portfolio comprise one-to-four family residential real estate, residential mortgage, short term consumer, multi-family residential and commercial real estate, commercial business, and home equity loans; lines of credit; and consumer loans, including automobile, sales finance, unsecured personal, and credit card loans, as well as loans secured by deposit accounts. In addition, the company offers employee benefit, property, and casualty insurance services; and trust, investment management, and brokerage services. As of December 31, 2017, it operated 172 community-banking locations in central and western Pennsylvania, western New York, and eastern Ohio. Northwest Bancshares, Inc. was founded in 1896 and is headquartered in Warren, Pennsylvania.

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