Preferred Bank (NASDAQ:PFBC) and Peoples Financial (OTCMKTS:PFBX) Financial Comparison

Peoples Financial (OTCMKTS:PFBX) and Preferred Bank (NASDAQ:PFBC) are both small-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their profitability, risk, analyst recommendations, dividends, earnings, institutional ownership and valuation.

Institutional & Insider Ownership

32.8% of Peoples Financial shares are held by institutional investors. Comparatively, 72.8% of Preferred Bank shares are held by institutional investors. 28.1% of Peoples Financial shares are held 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 breakdown of recent ratings for Peoples Financial and Preferred Bank, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Peoples Financial	0	0	0	0	0.00
Preferred Bank	0	2	1	0	2.33

Preferred Bank has a consensus target price of $104.00, indicating a potential upside of 31.58%. Given Preferred Bank’s stronger consensus rating and higher possible upside, analysts clearly believe Preferred Bank is more favorable than Peoples Financial.

Dividends

Peoples Financial pays an annual dividend of $0.36 per share and has a dividend yield of 1.9%. Preferred Bank pays an annual dividend of $3.00 per share and has a dividend yield of 3.8%. Peoples Financial pays out 7.7% of its earnings in the form of a dividend. Preferred Bank pays out 31.2% 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.

Valuation and Earnings

This table compares Peoples Financial and Preferred Bank”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Peoples Financial	$39.52 million	2.24	$21.70 million	$4.66	4.12
Preferred Bank	$283.96 million	4.02	$130.66 million	$9.63	8.21

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

Profitability

This table compares Peoples Financial and Preferred Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Peoples Financial	54.68%	26.99%	2.51%
Preferred Bank	25.00%	17.80%	1.91%

Risk and Volatility

Peoples Financial has a beta of 0.4, meaning that its share price is 60% less volatile than the S&P 500. Comparatively, Preferred Bank has a beta of 0.71, meaning that its share price is 29% less volatile than the S&P 500.

Summary

Preferred Bank beats Peoples Financial on 11 of the 16 factors compared between the two stocks.

About Peoples Financial

Peoples Financial Corporation operates as the bank holding company for The Peoples Bank that provides banking, financial, and trust services to government entities, individuals, and small and commercial businesses in Mississippi. The company accepts various deposits, such as interest and non-interest-bearing checking accounts, savings accounts, certificates of deposit, and individual retirement accounts (IRAs). It offers business, commercial, real estate, construction, personal, and installment loans; and personal trust, agencies, and estate services, including living and testamentary trusts, executorships, guardianships, and conservatorships. In addition, the company provides self-directed IRAs; and escrow management, stock transfer, and bond paying agency accounts to corporate customers. Further, it offers other services consisting of safe deposit box rental, wire transfer, night drop facilities, collection, cash management, and Internet banking services. the company provides services to customers of various industries, such as seafood, retail, hospitality, hotel/motel, gaming, and construction. Peoples Financial Corporation was founded in 1896 and is headquartered in Biloxi, Mississippi.

About Preferred Bank

Preferred Bank provides various commercial banking products and services to small and mid-sized businesses and their owners, entrepreneurs, real estate developers and investors, professionals, and high net worth individuals. The company accepts checking, savings, and money market deposit accounts; fixed-rate and fixed maturity retail, and non-retail certificates of deposit; and individual retirement accounts. It also provides real estate mortgage loans that are secured by retail, industrial, office, special purpose, and residential single and multi-family properties; real estate construction loans; commercial loans comprising lines of credit for working capital, term loans for capital expenditures, and commercial and stand-by letters of credit; and small business administration loans. In addition, the company offers trade finance services, including commercial and export letters of credit, import lines of credit, documentary collections, international wire transfers, acceptances/trust receipt financing products, export financing, and bills purchase programs. Further, it provides cash management services; and internet, mobile, and tablet banking services. The company operates through full-service branch offices in the California counties of Los Angeles, Orange and San Francisco; Flushing, New York; Houston suburb of Sugar Land, Texas; and a satellite office in Manhattan, New York. The company was incorporated in 1991 and is headquartered in Los Angeles, California.