Independent Bank Group (NASDAQ: IBTX) and Yadkin Financial Corp (NYSE:YDKN) are both small-cap commercial banks companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, risk, analyst recommendations, dividends, profitability, valuation and earnings.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Independent Bank Group and Yadkin Financial Corp, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Independent Bank Group 0 0 5 0 3.00
Yadkin Financial Corp 0 0 0 0 N/A

Independent Bank Group currently has a consensus target price of $71.40, suggesting a potential upside of 11.82%. Given Independent Bank Group’s higher probable upside, analysts plainly believe Independent Bank Group is more favorable than Yadkin Financial Corp.

Valuation and Earnings

This table compares Independent Bank Group and Yadkin Financial Corp’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Independent Bank Group $229.60 million 7.73 $53.54 million $2.91 21.94
Yadkin Financial Corp N/A N/A N/A $1.12 30.79

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

Insider & Institutional Ownership

46.8% of Independent Bank Group shares are held by institutional investors. Comparatively, 69.7% of Yadkin Financial Corp shares are held by institutional investors. 7.7% of Independent Bank Group shares are held by insiders. Comparatively, 3.0% of Yadkin Financial Corp shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Risk & Volatility

Independent Bank Group has a beta of 1.29, suggesting that its stock price is 29% more volatile than the S&P 500. Comparatively, Yadkin Financial Corp has a beta of 0.98, suggesting that its stock price is 2% less volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
Independent Bank Group 23.46% 8.11% 1.08%
Yadkin Financial Corp 18.40% 5.41% 0.75%

Dividends

Independent Bank Group pays an annual dividend of $0.40 per share and has a dividend yield of 0.6%. Yadkin Financial Corp pays an annual dividend of $0.40 per share and has a dividend yield of 1.2%. Independent Bank Group pays out 13.7% of its earnings in the form of a dividend. Yadkin Financial Corp pays out 35.7% 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.

Summary

Independent Bank Group beats Yadkin Financial Corp on 10 of the 12 factors compared between the two stocks.

Independent Bank Group Company Profile

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.

Yadkin Financial Corp Company Profile

Yadkin Financial Corporation is a bank holding company. The Company conducts its business operations through its subsidiary, Yadkin Bank, which is a chartered community bank that provides services in approximately 110 branches across North Carolina and South Carolina. Yadkin Bank provides banking, mortgage, investment and insurance services to businesses and consumers across the Carolinas. It operates through a segment, which is providing general commercial banking and financial services to individuals and businesses located in North Carolina and South Carolina, and to customers in various states through its Small Business Administration (SBA) lending program. It offers various loans, such as commercial and industrial (C&I) loans and government-guaranteed loans. The Company’s investment securities portfolio includes the United States Government-sponsored enterprise (GSE) obligations and securities guaranteed by the United States SBA. The Company’s primary source of funds is deposits.

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