First Financial Bankshares (NASDAQ: FFIN) and Heritage Commerce (NASDAQ:HTBK) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their institutional ownership, valuation, dividends, earnings, analyst recommendations, profitability and risk.

Profitability

This table compares First Financial Bankshares and Heritage Commerce’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
First Financial Bankshares 35.72% 12.61% 1.60%
Heritage Commerce 20.56% 11.48% 1.13%

Dividends

First Financial Bankshares pays an annual dividend of $0.76 per share and has a dividend yield of 1.6%. Heritage Commerce pays an annual dividend of $0.44 per share and has a dividend yield of 2.8%. First Financial Bankshares pays out 42.0% of its earnings in the form of a dividend. Heritage Commerce pays out 71.0% 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.

Analyst Recommendations

This is a summary of recent ratings for First Financial Bankshares and Heritage Commerce, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
First Financial Bankshares 1 5 0 0 1.83
Heritage Commerce 0 0 2 0 3.00

First Financial Bankshares presently has a consensus target price of $42.67, suggesting a potential downside of 9.22%. Heritage Commerce has a consensus target price of $17.50, suggesting a potential upside of 10.20%. Given Heritage Commerce’s stronger consensus rating and higher probable upside, analysts clearly believe Heritage Commerce is more favorable than First Financial Bankshares.

Risk & Volatility

First Financial Bankshares has a beta of 1.37, suggesting that its share price is 37% more volatile than the S&P 500. Comparatively, Heritage Commerce has a beta of 0.6, suggesting that its share price is 40% less volatile than the S&P 500.

Institutional & Insider Ownership

51.2% of First Financial Bankshares shares are held by institutional investors. Comparatively, 70.2% of Heritage Commerce shares are held by institutional investors. 5.4% of First Financial Bankshares shares are held by insiders. Comparatively, 5.7% of Heritage Commerce shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares First Financial Bankshares and Heritage Commerce’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
First Financial Bankshares $336.99 million 9.24 $120.37 million $1.81 25.97
Heritage Commerce $116.52 million 5.21 $23.95 million $0.62 25.61

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

Summary

First Financial Bankshares beats Heritage Commerce on 10 of the 16 factors compared between the two stocks.

About First Financial Bankshares

First Financial Bankshares, Inc. is a financial holding company. The Company, through its subsidiaries, conducts commercial banking business. The Company’s subsidiaries included First Financial Bank, National Association, Abilene, Texas; First Technology Services, Inc., Abilene, Texas; First Financial Trust & Asset Management Company, National Association, Abilene, Texas; First Financial Investments, Inc., Abilene, Texas, First Financial Insurance Agency, Inc., Abilene, Texas, Commercial Bancshares, Inc., and Commercial State Bank, Kingwood, Texas. Its loan portfolio consists of loans made to businesses, professionals, individuals, and farm and ranch operations located in the primary trade areas served by its subsidiary bank. Its securities available-for-sale include the United States Treasury securities, Obligations of the United States Government sponsored enterprises and agencies and Obligations of states and political subdivisions.

About Heritage Commerce

Heritage Commerce Corp is a bank holding company. The Company, through its subsidiary Heritage Bank of Commerce (the Bank), provides a range of banking services. The Bank is a California state-chartered multi-community independent bank that offers a range of commercial banking services to small and medium-sized businesses and their owners, managers and employees. As of December 31, 2016, the Company operated through 11 service branch offices located in the southern and eastern regions of the general San Francisco Bay Area of California in the counties of Santa Clara, Alameda, Contra Costa and San Benito. The Company’s subsidiary, CSNK Working Capital Finance Corp., doing business as Bay View Funding, provides business-essential working capital factoring financing to various industries across the United States. As of December 31, 2016, the Bank operated automated teller machines (ATMs) at five different locations.

Receive News & Ratings for First Financial Bankshares Daily - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings for First Financial Bankshares and related companies with MarketBeat.com's FREE daily email newsletter.