Independent Bank Group (NASDAQ: IBTX) and BancorpSouth (NYSE:BXS) are both finance companies, but which is the better business? We will contrast the two companies based on the strength of their profitabiliy, dividends, institutional ownership, valuation, earnings, analyst recommendations and risk.

Dividends

Independent Bank Group pays an annual dividend of $0.40 per share and has a dividend yield of 0.7%. BancorpSouth pays an annual dividend of $0.50 per share and has a dividend yield of 1.6%. Independent Bank Group pays out 13.2% of its earnings in the form of a dividend. BancorpSouth pays out 31.6% 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. BancorpSouth has raised its dividend for 4 consecutive years. BancorpSouth is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Independent Bank Group and BancorpSouth, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Independent Bank Group 0 2 2 0 2.50
BancorpSouth 0 8 1 0 2.11

Independent Bank Group presently has a consensus target price of $62.50, indicating a potential upside of 6.11%. BancorpSouth has a consensus target price of $28.80, indicating a potential downside of 5.42%. Given Independent Bank Group’s stronger consensus rating and higher possible upside, analysts clearly believe Independent Bank Group is more favorable than BancorpSouth.

Earnings and Valuation

This table compares Independent Bank Group and BancorpSouth’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Independent Bank Group $197.21 million 8.30 $84.17 million $3.03 19.44
BancorpSouth $738.08 million 3.77 $144.32 million $1.58 19.27

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

Profitability

This table compares Independent Bank Group and BancorpSouth’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Independent Bank Group 24.24% 9.08% 1.04%
BancorpSouth 19.19% 8.65% 1.02%

Volatility & Risk

Independent Bank Group has a beta of 1.26, suggesting that its share price is 26% more volatile than the S&P 500. Comparatively, BancorpSouth has a beta of 1.4, suggesting that its share price is 40% more volatile than the S&P 500.

Institutional and Insider Ownership

33.2% of Independent Bank Group shares are owned by institutional investors. Comparatively, 67.6% of BancorpSouth shares are owned by institutional investors. 7.7% of Independent Bank Group shares are owned by insiders. Comparatively, 2.6% of BancorpSouth shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Summary

Independent Bank Group beats BancorpSouth on 11 of the 17 factors compared between the two stocks.

About Independent Bank Group

Independent Bank Group, Inc. is a bank holding company. Through the Company’s subsidiary, Independent Bank (the Bank), the Company provides a range of commercial banking products and services tailored to meet the needs of businesses, professionals and individuals. As of December 31, 2016, the Company operated 41 banking offices in the Dallas/North Texas area, the Austin/Central Texas area, and the Houston metropolitan area. The Company offers residential mortgages through its mortgage brokerage division. As a mortgage broker, the Company originates residential mortgages, which are sold into the secondary market shortly after closing. The Company also provides wealth management services to its customers, including investment advisory and other related services. The Company offers a range of commercial and retail lending products to businesses, professionals and individuals. Deposits are the Company’s principal source of funds for use in lending and other general banking purposes.

About BancorpSouth

BancorpSouth, Inc. is a financial holding company. The Company, through its principal bank subsidiary, BancorpSouth Bank (the Bank), conducts commercial banking and financial services operations in Alabama, Arkansas, Florida, Louisiana, Mississippi, Missouri, Tennessee, Texas and Illinois. The Company’s segments include Community Banking, Insurance Agencies, and General Corporate and Other. Its Community Banking segment provides a range of deposit products, commercial loans and consumer loans. Its Insurance Agencies segment serves as agents in the sale of commercial lines of insurance and full lines of property and casualty, life, health and employee benefits products and services. Its General Corporate and Other segment includes mortgage banking, trust services, credit card activities, investment services and other activities not allocated to the Community Banking or Insurance Agencies segments.

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