Reviewing QCR (NASDAQ:QCRH) and Sound Financial Bancorp (NASDAQ:SFBC)

QCR (NASDAQ:QCRH) and Sound Financial Bancorp (NASDAQ:SFBC) are both small-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their profitability, institutional ownership, analyst recommendations, dividends, risk, earnings and valuation.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
QCR	22.86%	12.87%	1.50%
Sound Financial Bancorp	12.89%	7.31%	0.74%

Analyst Ratings

This is a summary of recent recommendations and price targets for QCR and Sound Financial Bancorp, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
QCR	0	3	4	0	2.57
Sound Financial Bancorp	0	0	1	0	3.00

QCR presently has a consensus price target of $108.40, suggesting a potential upside of 9.42%. Given QCR’s higher possible upside, research analysts plainly believe QCR is more favorable than Sound Financial Bancorp.

Dividends

QCR pays an annual dividend of $0.60 per share and has a dividend yield of 0.6%. Sound Financial Bancorp pays an annual dividend of $0.84 per share and has a dividend yield of 1.8%. QCR pays out 7.1% of its earnings in the form of a dividend. Sound Financial Bancorp pays out 26.9% 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. Sound Financial Bancorp has raised its dividend for 2 consecutive years. Sound Financial Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

QCR has a beta of 0.73, meaning that its stock price is 27% less volatile than the S&P 500. Comparatively, Sound Financial Bancorp has a beta of 0.01, meaning that its stock price is 99% less volatile than the S&P 500.

Valuation and Earnings

This table compares QCR and Sound Financial Bancorp”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
QCR	$603.75 million	2.69	$127.19 million	$8.46	11.71
Sound Financial Bancorp	$61.52 million	1.93	$7.16 million	$3.12	14.80

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

Insider and Institutional Ownership

70.0% of QCR shares are held by institutional investors. Comparatively, 68.8% of Sound Financial Bancorp shares are held by institutional investors. 3.2% of QCR shares are held by company insiders. Comparatively, 12.3% of Sound Financial Bancorp shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

QCR beats Sound Financial Bancorp on 12 of the 17 factors compared between the two stocks.

About QCR

QCR Holdings, Inc., a multi-bank holding company, provides commercial and consumer banking, and trust and asset management services. The company’s deposit products include noninterest-bearing demand, interest-bearing demand, time, and brokered deposits. It also provides various commercial and retail lending/leasing, and investment services to corporations, partnerships, individuals, and government agencies. The company’s loan portfolio comprises loans to small and mid-sized businesses; business loans, including lines of credit for working capital and operational purposes; term loans for the acquisition of facilities, equipment, and other purposes; commercial and residential real estate loans; and installment and other consumer loans, such as home improvement, home equity, motor vehicle, and signature loans, as well as small personal credit lines. In addition, it engages in leasing of machinery and equipment to commercial and industrial businesses under direct financing lease contracts; and issuance of trust preferred securities. QCR Holdings, Inc. was incorporated in 1993 and is headquartered in Moline, Illinois.

About Sound Financial Bancorp

Sound Financial Bancorp, Inc. operates as the bank holding company for Sound Community Bank that provides banking and other financial services for consumers and businesses. It accepts various deposits products comprising savings, money market deposit, NOW, and demand accounts, as well as certificates of deposit. The company also offers loans secured by first and second mortgages on one-to four-family residences; home equity loans, including fixed-rate loans and variable-rate lines of credit; commercial and multifamily real estate loans; construction loans secured by single-family residences, and commercial and multifamily real estate; land loans; commercial business loans to finance commercial vehicles and equipment, as well as loans secured by accounts receivable and/or inventory; and secured and unsecured consumer loans, such as new and used manufactured homes, floating homes, automobiles, boats, and recreational vehicle loans, and loans secured by deposit accounts. The company was founded in 1953 and is headquartered in Seattle, Washington.