Contrasting Oak Valley Bancorp (NASDAQ:OVLY) and Heritage Commerce (NASDAQ:HTBK)

Oak Valley Bancorp (NASDAQ:OVLY) and Heritage Commerce (NASDAQ:HTBK) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their valuation, profitability, risk, institutional ownership, analyst recommendations, earnings and dividends.

Valuation and Earnings

This table compares Oak Valley Bancorp and Heritage Commerce”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Oak Valley Bancorp	$83.09 million	3.41	$23.91 million	$2.88	11.69
Heritage Commerce	$197.46 million	4.20	$47.83 million	$0.78	17.24

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

Analyst Recommendations

This is a summary of current ratings and price targets for Oak Valley Bancorp and Heritage Commerce, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Oak Valley Bancorp	0	0	1	0	3.00
Heritage Commerce	0	5	2	0	2.29

Heritage Commerce has a consensus price target of $13.13, indicating a potential downside of 2.42%. Given Heritage Commerce’s higher probable upside, analysts plainly believe Heritage Commerce is more favorable than Oak Valley Bancorp.

Dividends

Oak Valley Bancorp pays an annual dividend of $0.75 per share and has a dividend yield of 2.2%. Heritage Commerce pays an annual dividend of $0.52 per share and has a dividend yield of 3.9%. Oak Valley Bancorp pays out 26.0% of its earnings in the form of a dividend. Heritage Commerce pays out 66.7% 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. Oak Valley Bancorp has increased its dividend for 11 consecutive years.

Profitability

This table compares Oak Valley Bancorp and Heritage Commerce’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Oak Valley Bancorp	24.80%	11.99%	1.20%
Heritage Commerce	17.77%	8.07%	1.01%

Volatility and Risk

Oak Valley Bancorp has a beta of 0.21, indicating that its stock price is 79% less volatile than the S&P 500. Comparatively, Heritage Commerce has a beta of 0.69, indicating that its stock price is 31% less volatile than the S&P 500.

Insider and Institutional Ownership

30.9% of Oak Valley Bancorp shares are held by institutional investors. Comparatively, 75.6% of Heritage Commerce shares are held by institutional investors. 13.9% of Oak Valley Bancorp shares are held by company insiders. Comparatively, 2.7% of Heritage Commerce shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Summary

Heritage Commerce beats Oak Valley Bancorp on 9 of the 17 factors compared between the two stocks.

About Oak Valley Bancorp

Oak Valley Bancorp operates as the bank holding company for Oak Valley Community Bank that provides a range of commercial banking services to individuals and small to medium-sized businesses in the Central Valley and the Eastern Sierras. The company's deposits products include checking and savings, money market, health savings, and individual retirement accounts, as well as certificates of deposit. It also offers commercial real estate loans, commercial business lending and trade finance, and small business administration lending, as well as consumer loans, including automobile loans, home mortgages, credit lines, and other personal loans. In addition, the company provides online and mobile banking, remote deposit capture, merchant, night depository, extended hours, wire transfer of funds, note collection services, and automated teller machines. The company was incorporated in 1990 and is headquartered in Oakdale, California.

About Heritage Commerce

Heritage Commerce Corp operates as the bank holding company for Heritage Bank of Commerce that provides various commercial and personal banking services to residents and the business/professional community in California. Its deposit products for business banking and retail markets include interest and non-interest-bearing demand, savings, and money market accounts, as well as certificates of deposit and time deposits. The company’s loan portfolio comprises commercial loans, such as operating secured and unsecured loans advanced for working capital, equipment purchases, and other business purposes; commercial real estate loans; commercial construction loans for rental properties, commercial buildings, and homes; small business administration loans; home equity lines of credit; multifamily loans on residential properties; residential mortgage loans; and consumer loans consisting of loans for financing automobiles, various consumer goods, and other personal purposes. In addition, it offers other banking services, including cashier’s checks, bank by mail, night depositories, safe deposit boxes, direct deposit, automated payroll, electronic funds transfer, online bill pay, homeowner association, remote deposit capture, automated clearing house origination, electronic data interchange, and check imaging services, as well as other customary banking, factoring financing, and electronic banking services. Heritage Commerce Corp was founded in 1994 and is headquartered in San Jose, California.