Stock Yards Bancorp (NASDAQ: SYBT) and First Business Financial Services (NASDAQ:FBIZ) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their institutional ownership, profitability, analyst recommendations, dividends, valuation, earnings and risk.

Valuation & Earnings

This table compares Stock Yards Bancorp and First Business Financial Services’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Stock Yards Bancorp $138.14 million 6.37 $41.92 million $1.85 21.00
First Business Financial Services $66.32 million 3.00 $11.85 million $1.36 16.76

Stock Yards Bancorp has higher revenue and earnings than First Business Financial Services. First Business Financial Services is trading at a lower price-to-earnings ratio than Stock Yards Bancorp, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Stock Yards Bancorp has a beta of 0.7, suggesting that its stock price is 30% less volatile than the S&P 500. Comparatively, First Business Financial Services has a beta of 0.95, suggesting that its stock price is 5% less volatile than the S&P 500.

Insider & Institutional Ownership

48.1% of Stock Yards Bancorp shares are held by institutional investors. Comparatively, 60.1% of First Business Financial Services shares are held by institutional investors. 6.2% of Stock Yards Bancorp shares are held by insiders. Comparatively, 8.3% of First Business Financial Services shares are held by 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.

Profitability

This table compares Stock Yards Bancorp and First Business Financial Services’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Stock Yards Bancorp 28.11% 13.36% 1.40%
First Business Financial Services 12.64% 7.25% 0.66%

Dividends

Stock Yards Bancorp pays an annual dividend of $0.80 per share and has a dividend yield of 2.1%. First Business Financial Services pays an annual dividend of $0.52 per share and has a dividend yield of 2.3%. Stock Yards Bancorp pays out 43.2% of its earnings in the form of a dividend. First Business Financial Services pays out 38.2% 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. First Business Financial Services is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of recent ratings for Stock Yards Bancorp and First Business Financial Services, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Stock Yards Bancorp 0 1 0 0 2.00
First Business Financial Services 0 3 0 0 2.00

Stock Yards Bancorp currently has a consensus target price of $38.00, suggesting a potential downside of 2.19%. First Business Financial Services has a consensus target price of $24.50, suggesting a potential upside of 7.46%. Given First Business Financial Services’ higher possible upside, analysts clearly believe First Business Financial Services is more favorable than Stock Yards Bancorp.

Summary

Stock Yards Bancorp beats First Business Financial Services on 8 of the 14 factors compared between the two stocks.

Stock Yards Bancorp Company Profile

Stock Yards Bancorp, Inc. is the holding company for Stock Yards Bank & Trust Company (the Bank). The Bank is a state chartered bank. The Company operates through two segments: commercial banking, and wealth management and trust. The commercial banking segment provides a full range of loan and deposit products to individual consumers and businesses, plus origination of consumer mortgages and securities brokerage activity. The wealth management and trust segment provides investment management, trust and estate administration, and retirement plan services. The Bank provides commercial and personal banking services in the Louisville, Kentucky, Indianapolis, Indiana and Cincinnati, Ohio metropolitan markets through 37 full service banking offices, as of December 31, 2016. The Bank also originates and sells single-family residential mortgages. Additionally, the Bank offers securities brokerage services via its branch network through an arrangement with a third party broker-dealer.

First Business Financial Services Company Profile

First Business Financial Services, Inc. (FBFS) is a bank holding company. The Company engages in the commercial banking business through its bank subsidiaries, which include First Business Bank (FBB), First Business Bank-Milwaukee (FBB-Milwaukee) and Alterra Bank (Alterra) (FBB and FBB-Milwaukee and, together with FBB, the Banks). The operations of FBFS are conducted through the Banks and certain subsidiaries of FBB. The Banks operate as business banks focusing on delivering a line of commercial banking products, including commercial loans and commercial real estate loans, and services to meet the needs of small- and medium-sized businesses, business owners, executives, professionals and high net worth individuals. Its business lines include commercial lending, asset-based financing, equipment financing, small business administration (SBA) lending, treasury management services, and trust and investment services. Its investments include short-term investments and securities.

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