Financial Contrast: Preferred Bank (NASDAQ:PFBC) & German American Bancorp (NASDAQ:GABC)

Preferred Bank (NASDAQ:PFBCGet Rating) and German American Bancorp (NASDAQ:GABCGet Rating) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, profitability, earnings, dividends, risk and institutional ownership.

Institutional & Insider Ownership

72.9% of Preferred Bank shares are held by institutional investors. Comparatively, 43.0% of German American Bancorp shares are held by institutional investors. 6.7% of German American Bancorp shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Preferred Bank and German American Bancorp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Preferred Bank 43.53% 16.95% 1.65%
German American Bancorp 36.61% 13.02% 1.55%

Dividends

Preferred Bank pays an annual dividend of $1.72 per share and has a dividend yield of 2.4%. German American Bancorp pays an annual dividend of $0.92 per share and has a dividend yield of 2.4%. Preferred Bank pays out 26.8% of its earnings in the form of a dividend. German American Bancorp pays out 28.9% 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. Preferred Bank has raised its dividend for 1 consecutive years and German American Bancorp has raised its dividend for 10 consecutive years. German American Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares Preferred Bank and German American Bancorp’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Preferred Bank $218.78 million 4.96 $95.24 million $6.42 11.22
German American Bancorp $229.84 million 4.86 $84.14 million $3.18 11.95

Preferred Bank has higher earnings, but lower revenue than German American Bancorp. Preferred Bank is trading at a lower price-to-earnings ratio than German American Bancorp, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current recommendations and price targets for Preferred Bank and German American Bancorp, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Preferred Bank 0 0 5 0 3.00
German American Bancorp 0 0 0 0 N/A

Preferred Bank presently has a consensus target price of $89.60, suggesting a potential upside of 24.38%. Given Preferred Bank’s higher possible upside, equities research analysts clearly believe Preferred Bank is more favorable than German American Bancorp.

Volatility & Risk

Preferred Bank has a beta of 1.27, indicating that its share price is 27% more volatile than the S&P 500. Comparatively, German American Bancorp has a beta of 0.65, indicating that its share price is 35% less volatile than the S&P 500.

Summary

Preferred Bank beats German American Bancorp on 11 of the 16 factors compared between the two stocks.

About Preferred Bank (Get Rating)

Preferred Bank provides various commercial banking products and services to small and mid-sized businesses and their owners, entrepreneurs, real estate developers and investors, professionals, and high net worth individuals in the United States. The company accepts checking, savings, and money market deposit accounts; fixed-rate and fixed maturity retail, and non-retail certificates of deposit; and individual retirement accounts. It also provides real estate mortgage loans that are secured by retail, industrial, office, special purpose, and residential single and multi-family properties; real estate construction loans; and commercial loans comprising lines of credit for working capital, term loans for capital expenditures, and commercial and stand-by letters of credit; and SBA loans. In addition, the company offers trade finance services, including commercial and export letters of credit, import lines of credit, documentary collections, international wire transfers, acceptances/trust receipt financing products, export financing, documentary collections, and bills purchase programs. Further, it provides various high-wealth banking services to wealthy individuals residing in the Pacific Rim area; and remote deposit capture, and online and mobile banking services. Additionally, the company offers various banking services to physicians, accountants, attorneys, business managers, and other professionals; and safe deposit boxes, account reconciliation, courier service, and cash management services to the manufacturing, service, and distribution companies. As of December 31, 2021, it had eleven full-service branch offices in Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine, Diamond Bar, Pico Rivera, Tarzana, and San Francisco; and one branch in Flushing, New York. The company was incorporated in 1991 and is headquartered in Los Angeles, California.

About German American Bancorp (Get Rating)

German American Bancorp, Inc. operates as a bank holding company for German American Bank that provides retail and commercial banking services. The company operates through three segments: Core Banking, Wealth Management Services, and Insurance Operations. The Core Banking segment accepts deposits from the general public; and originates consumer, commercial and agricultural, commercial and agricultural real estate, and residential mortgage loans, as well as sells residential mortgage loans in the secondary market. The Wealth Management segment provides trust, investment advisory, brokerage, and retirement planning services. The Insurance Operations segment offers a range of personal and corporate property and casualty insurance products. As of December 31, 2021, the company operated 77 banking offices in 19 contiguous southern Indiana counties; and 14 counties in Kentucky. German American Bancorp, Inc. was founded in 1910 and is based in Jasper, Indiana.

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