First Financial Bankshares (NASDAQ: FFIN) and Prosperity Bancshares (NYSE:PB) are both mid-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, institutional ownership, valuation, profitability, risk, analyst recommendations and dividends.

Earnings & Valuation

This table compares First Financial Bankshares and Prosperity Bancshares’ gross 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
Prosperity Bancshares $793.99 million 6.75 $272.16 million $3.92 19.66

Prosperity Bancshares has higher revenue and earnings than First Financial Bankshares. Prosperity Bancshares 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.

Profitability

This table compares First Financial Bankshares and Prosperity Bancshares’ 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%
Prosperity Bancshares 34.28% 7.28% 1.22%

Analyst Ratings

This is a breakdown of recent recommendations for First Financial Bankshares and Prosperity Bancshares, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
First Financial Bankshares 1 5 0 0 1.83
Prosperity Bancshares 2 7 2 0 2.00

First Financial Bankshares currently has a consensus price target of $42.67, indicating a potential downside of 9.22%. Prosperity Bancshares has a consensus price target of $74.00, indicating a potential downside of 3.98%. Given Prosperity Bancshares’ stronger consensus rating and higher possible upside, analysts clearly believe Prosperity Bancshares is more favorable than First Financial Bankshares.

Volatility and Risk

First Financial Bankshares has a beta of 1.37, suggesting that its share price is 37% more volatile than the S&P 500. Comparatively, Prosperity Bancshares has a beta of 1.37, suggesting that its share price is 37% more volatile than the S&P 500.

Insider & Institutional Ownership

51.2% of First Financial Bankshares shares are held by institutional investors. Comparatively, 76.6% of Prosperity Bancshares shares are held by institutional investors. 5.4% of First Financial Bankshares shares are held by company insiders. Comparatively, 4.9% of Prosperity Bancshares shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Dividends

First Financial Bankshares pays an annual dividend of $0.76 per share and has a dividend yield of 1.6%. Prosperity Bancshares pays an annual dividend of $1.44 per share and has a dividend yield of 1.9%. First Financial Bankshares pays out 42.0% of its earnings in the form of a dividend. Prosperity Bancshares pays out 36.7% 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. First Financial Bankshares has raised its dividend for 14 consecutive years. Prosperity Bancshares is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Prosperity Bancshares beats First Financial Bankshares on 9 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 Prosperity Bancshares

Prosperity Bancshares, Inc. is a financial holding company, which operates through its bank subsidiary, Prosperity Bank (the Bank). The Bank provides a range of financial products and services to small and medium-sized businesses and consumers. The Company, through the Bank, offers a range of loan and deposit products to its customers. At December 31, 2016, the Bank maintained approximately 598,400 separate deposit accounts including certificates of deposit and 53,600 separate loan accounts. It offered commercial real estate (including multifamily residential) and one- to four-family residential loans, as of December 31, 2016. As of December 31, 2016, the Bank operated 245 full service banking locations; 65 in the Houston area; 29 in the South Texas area; 36 in the Dallas/Fort Worth area; 22 in the East Texas area; 29 in the Central Texas area; 34 in the West Texas area; 16 in the Bryan/College Station area, six in the Central Oklahoma area and eight in the Tulsa, Oklahoma area.

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