Heritage Financial (NASDAQ: HFWA) and Select Bancorp (NASDAQ:SLCT) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their earnings, profitability, analyst recommendations, dividends, institutional ownership, valuation and risk.

Volatility and Risk

Heritage Financial has a beta of 0.47, suggesting that its stock price is 53% less volatile than the S&P 500. Comparatively, Select Bancorp has a beta of 0.27, suggesting that its stock price is 73% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Heritage Financial and Select Bancorp, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Heritage Financial 0 2 2 0 2.50
Select Bancorp 0 1 0 0 2.00

Heritage Financial presently has a consensus target price of $32.67, indicating a potential upside of 6.06%. Select Bancorp has a consensus target price of $13.00, indicating a potential upside of 2.85%. Given Heritage Financial’s stronger consensus rating and higher probable upside, equities research analysts clearly believe Heritage Financial is more favorable than Select Bancorp.

Insider & Institutional Ownership

78.1% of Heritage Financial shares are owned by institutional investors. Comparatively, 18.9% of Select Bancorp shares are owned by institutional investors. 2.7% of Heritage Financial shares are owned by company insiders. Comparatively, 14.2% of Select Bancorp shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

Heritage Financial pays an annual dividend of $0.52 per share and has a dividend yield of 1.7%. Select Bancorp does not pay a dividend. Heritage Financial pays out 37.7% of its earnings in the form of a dividend.

Earnings & Valuation

This table compares Heritage Financial and Select Bancorp’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Heritage Financial $170.13 million 5.42 $38.91 million $1.38 22.32
Select Bancorp $37.93 million 3.89 $6.75 million $0.58 21.79

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

Profitability

This table compares Heritage Financial and Select Bancorp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Heritage Financial 23.48% 8.42% 1.05%
Select Bancorp 16.86% 6.38% 0.77%

Summary

Heritage Financial beats Select Bancorp on 14 of the 16 factors compared between the two stocks.

About Heritage Financial

Heritage Financial Corporation is a bank holding company. The Company is engaged in the business of planning, directing and coordinating the business activities of its bank subsidiary, Heritage Bank (the Bank). The Bank’s lending activities focus on commercial business lending. The Bank also originates consumer loans, real estate construction and land development loans, and one- to four-family residential loans. The Bank’s investment securities available for sale include the United States treasury and the United States Government-sponsored agencies; municipal securities; mortgage-backed securities and collateralized mortgage obligations, which include residential and commercial; collateralized loan obligations; corporate obligations, and other securities. The Bank’s primary sources of funds are deposits and loan repayments. Borrowings are used on a short-term basis to compensate for reductions in other sources of funds, such as deposit inflows.

About Select Bancorp

Select Bancorp, Inc. is the bank holding company for Select Bank & Trust Company (the Bank). The Bank is a commercial bank. The Bank provides commercial and retail financial services to customers located in its market areas. The Bank offers a range of banking services, including checking and savings accounts, commercial, consumer, mortgage and personal loans, and other associated financial services. The Bank’s lending activities are oriented to the consumer/retail customer, as well as to the small-to-medium sized businesses located in central and eastern North Carolina. The Bank offers commercial, consumer and mortgage lending products. It originates construction loans for the purpose of acquisition, development and construction of both residential and commercial properties (ADC loans). The Bank’s deposits include savings, negotiable order of withdrawal (NOW) account and money market deposits, time deposits and non-interest-bearing deposits.

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