Comparing Ally Financial (NYSE:ALLY) and Five Star Bancorp (NASDAQ:FSBC)

Five Star Bancorp (NASDAQ:FSBC) and Ally Financial (NYSE:ALLY) are both finance companies, but which is the better business? We will compare the two businesses based on the strength of their institutional ownership, analyst recommendations, valuation, profitability, risk, dividends and earnings.

Volatility & Risk

Five Star Bancorp has a beta of 0.41, suggesting that its stock price is 59% less volatile than the S&P 500. Comparatively, Ally Financial has a beta of 1.41, suggesting that its stock price is 41% more volatile than the S&P 500.

Insider and Institutional Ownership

46.9% of Five Star Bancorp shares are held by institutional investors. Comparatively, 88.8% of Ally Financial shares are held by institutional investors. 25.6% of Five Star Bancorp shares are held by insiders. Comparatively, 0.7% of Ally Financial shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Five Star Bancorp and Ally Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Five Star Bancorp	23.84%	16.12%	1.29%
Ally Financial	10.59%	8.35%	0.48%

Valuation and Earnings

This table compares Five Star Bancorp and Ally Financial’s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Five Star Bancorp	$181.89 million	2.69	$47.73 million	$2.63	8.73
Ally Financial	$8.21 billion	1.47	$1.02 billion	$2.45	16.26

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

Dividends

Five Star Bancorp pays an annual dividend of $0.80 per share and has a dividend yield of 3.5%. Ally Financial pays an annual dividend of $1.20 per share and has a dividend yield of 3.0%. Five Star Bancorp pays out 30.4% of its earnings in the form of a dividend. Ally Financial pays out 49.0% 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. Five Star Bancorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of current ratings for Five Star Bancorp and Ally Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Five Star Bancorp	0	1	2	0	2.67
Ally Financial	3	7	8	0	2.28

Five Star Bancorp presently has a consensus price target of $27.00, suggesting a potential upside of 17.65%. Ally Financial has a consensus price target of $41.00, suggesting a potential upside of 2.94%. Given Five Star Bancorp’s stronger consensus rating and higher possible upside, analysts plainly believe Five Star Bancorp is more favorable than Ally Financial.

Summary

Five Star Bancorp beats Ally Financial on 10 of the 16 factors compared between the two stocks.

About Five Star Bancorp

Five Star Bancorp operates as the bank holding company for Five Star Bank that provides a range of banking products and services to small and medium-sized businesses, professionals, and individuals in Northern California. It accepts various deposits, such as money market accounts, noninterest-bearing and interest checking accounts, savings accounts, term certificate accounts, and time deposits. The company also offers loan products, including commercial and residential real estate loans; commercial loans; commercial land loans; farmland loans; commercial and residential construction loans; and consumer and other loans, as well as operating lines of credit. In addition, it provides debit cards; and remote deposit capture, online and mobile banking, and direct deposit services. Five Star Bancorp was founded in 1999 and is headquartered in Rancho Cordova, California.

About Ally Financial

Ally Financial Inc., a digital financial-services company, provides various digital financial products and services in the United States, Canada, and Bermuda. The company operates through Automotive Finance Operations, Insurance Operations, Mortgage Finance Operations, and Corporate Finance Operations segments. The Automotive Finance Operations segment offers automotive financing services, including providing retail installment sales contracts, loans and operating leases, term loans to dealers, financing dealer floorplans and other lines of credit to dealers, warehouse lines to automotive retailers, and fleet financing. It also provides financing services to companies and municipalities for the purchase or lease of vehicles, and vehicle-remarketing services. The Insurance Operations segment offers consumer finance protection and insurance products through the automotive dealer channel, and commercial insurance products directly to dealers. This segment provides vehicle service and maintenance contract, and guaranteed asset protection products; and underwrites commercial insurance coverages, which primarily insure dealers' vehicle inventory. The Mortgage Finance Operations segment manages consumer mortgage loan portfolio that includes bulk purchases of jumbo and low-to-moderate income mortgage loans originated by third parties, as well as direct-to-consumer mortgage offerings. The Corporate Finance Operations segment provides senior secured leveraged cash flow and asset-based loans to middle market companies; leveraged loans; and commercial real estate product to serve companies in the nursing facilities, senior housing, and medical office buildings. It also offers commercial banking products and services. In addition, it provides securities brokerage and investment advisory services. The company was formerly known as GMAC Inc. and changed its name to Ally Financial Inc. in May 2010. Ally Financial Inc. was founded in 1919 and is based in Detroit, Michigan.