Southern First Bancshares (NASDAQ: SFST) and Capstar Financial Holdings (NASDAQ:CSTR) are both small-cap finance companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, profitability, dividends, risk, analyst recommendations, earnings and institutional ownership.

Institutional & Insider Ownership

67.2% of Southern First Bancshares shares are owned by institutional investors. Comparatively, 36.4% of Capstar Financial Holdings shares are owned by institutional investors. 12.9% of Southern First Bancshares shares are owned by insiders. Comparatively, 19.3% of Capstar Financial Holdings shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Southern First Bancshares and Capstar Financial Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Southern First Bancshares 21.10% 11.10% 0.97%
Capstar Financial Holdings 7.05% 9.27% 0.95%

Analyst Recommendations

This is a summary of recent recommendations and price targets for Southern First Bancshares and Capstar Financial Holdings, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Southern First Bancshares 0 1 2 0 2.67
Capstar Financial Holdings 0 4 0 0 2.00

Southern First Bancshares currently has a consensus target price of $38.67, indicating a potential downside of 6.60%. Capstar Financial Holdings has a consensus target price of $18.00, indicating a potential downside of 13.42%. Given Southern First Bancshares’ stronger consensus rating and higher probable upside, analysts plainly believe Southern First Bancshares is more favorable than Capstar Financial Holdings.

Volatility & Risk

Southern First Bancshares has a beta of 0.72, meaning that its share price is 28% less volatile than the S&P 500. Comparatively, Capstar Financial Holdings has a beta of 1.41, meaning that its share price is 41% more volatile than the S&P 500.

Valuation and Earnings

This table compares Southern First Bancshares and Capstar Financial Holdings’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Southern First Bancshares $62.04 million 4.88 $13.03 million $1.99 20.80
Capstar Financial Holdings $56.48 million 4.18 $9.09 million $0.35 59.40

Southern First Bancshares has higher revenue and earnings than Capstar Financial Holdings. Southern First Bancshares is trading at a lower price-to-earnings ratio than Capstar Financial Holdings, indicating that it is currently the more affordable of the two stocks.

Summary

Southern First Bancshares beats Capstar Financial Holdings on 11 of the 14 factors compared between the two stocks.

Southern First Bancshares Company Profile

Southern First Bancshares, Inc. is a bank holding company that owns the capital stock of Southern First Bank (the Bank), a South Carolina state bank, and all of the stock of Greenville First Statutory Trust I and II (the Trusts). The Bank is a commercial bank with approximately nine retail offices located in Greenville, Columbia and Charleston, South Carolina. The Bank is primarily engaged in the business of accepting demand deposits and savings deposits insured by the Federal Deposit Insurance Corporation (the FDIC) and providing commercial, consumer and mortgage loans to the public. In addition to deposit and loan services, the Company offers other bank services, such as Internet banking, cash management services, safe deposit boxes, direct deposit and automatic drafts for various accounts. The Bank offers a range of lending services, including real estate, commercial, and equity-line consumer loans to individuals and small- to medium-sized businesses, and professional firms.

Capstar Financial Holdings Company Profile

CapStar Financial Holdings, Inc. is a bank holding company. The Company operates primarily through its subsidiary, CapStar Bank. CapStar Bank is a commercial bank. The Company’s lines of business include commercial and industrial, commercial real estate, healthcare, correspondent banking, personal and private banking and wealth management, and mortgage banking. Its products and services include commercial and industrial loans to small and medium sized businesses, with a particular focus on businesses operating in the healthcare industry; commercial real estate loans; private banking and wealth management services for the owners and operators of business clients and other high net worth individuals, and correspondent banking services. As of June 30, 2016, the Company had seven locations, five of which are retail bank branches and two of which are mortgage origination offices.

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