Critical Review: Franklin Financial Services (NASDAQ:FRAF) vs. Flagstar Bank, National Association (NYSE:FLG)

Franklin Financial Services (NASDAQ:FRAF) and Flagstar Bank, National Association (NYSE:FLG) are both finance companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, institutional ownership, valuation, profitability, earnings, risk and analyst recommendations.

Volatility and Risk

Franklin Financial Services has a beta of -0.02, meaning that its share price is 102% less volatile than the S&P 500. Comparatively, Flagstar Bank, National Association has a beta of 1.01, meaning that its share price is 1% more volatile than the S&P 500.

Profitability

This table compares Franklin Financial Services and Flagstar Bank, National Association’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Franklin Financial Services	18.20%	14.21%	1.08%
Flagstar Bank, National Association	1.08%	0.98%	0.08%

Dividends

Franklin Financial Services pays an annual dividend of $1.36 per share and has a dividend yield of 2.2%. Flagstar Bank, National Association pays an annual dividend of $0.04 per share and has a dividend yield of 0.3%. Franklin Financial Services pays out 24.8% of its earnings in the form of a dividend. Flagstar Bank, National Association pays out 133.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Franklin Financial Services has increased its dividend for 1 consecutive years. Franklin Financial Services is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of recent recommendations for Franklin Financial Services and Flagstar Bank, National Association, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Franklin Financial Services	0	1	1	0	2.50
Flagstar Bank, National Association	1	3	9	0	2.62

Franklin Financial Services presently has a consensus price target of $68.00, indicating a potential upside of 7.66%. Flagstar Bank, National Association has a consensus price target of $16.79, indicating a potential upside of 18.21%. Given Flagstar Bank, National Association’s stronger consensus rating and higher possible upside, analysts plainly believe Flagstar Bank, National Association is more favorable than Franklin Financial Services.

Valuation & Earnings

This table compares Franklin Financial Services and Flagstar Bank, National Association”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Franklin Financial Services	$133.55 million	2.12	$21.23 million	$5.49	11.50
Flagstar Bank, National Association	$4.81 billion	1.23	-$177.00 million	$0.03	473.50

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

Institutional & Insider Ownership

24.8% of Franklin Financial Services shares are held by institutional investors. Comparatively, 67.9% of Flagstar Bank, National Association shares are held by institutional investors. 5.9% of Franklin Financial Services shares are held by insiders. Comparatively, 21.4% of Flagstar Bank, National Association shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Summary

Franklin Financial Services beats Flagstar Bank, National Association on 9 of the 17 factors compared between the two stocks.

About Franklin Financial Services

Franklin Financial Services Corporation operates as the bank holding company for Farmers and Merchants Trust Company of Chambersburg that provides commercial, retail banking, and trust services to businesses, individuals, governmental entities, and non-profit organizations in Pennsylvania. It offers various deposit products, including checking, savings, money management, and time deposit accounts, as well as demand deposits. The company also provides commercial real estate, construction and land development, commercial and industrial, and residential mortgage loans, as well as installment and revolving loans; consumer loans comprising unsecured personal lines of credit and installment loans; and secured and unsecured commercial and industrial loans, including accounts receivable and inventory financing, and commercial equipment financing. In addition, it offers various investment and trust services comprising estate planning and administration, corporate and personal trust fund management, pension, and profit sharing and other employee benefit funds management services, and custodial services, as well as non-trust related investment services; sells mutual funds, annuities, and insurance products; and offers safe deposit, pension, and fiduciary services. Further, the company engages in non-bank investment activities, such as venture capital investments. The company was founded in 1906 and is headquartered in Chambersburg, Pennsylvania.

About Flagstar Bank, National Association

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.