Critical Review: Sound Financial Bancorp (NASDAQ:SFBC) and First Capital (NASDAQ:FCAP)

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

Dividends

Sound Financial Bancorp pays an annual dividend of $0.76 per share and has a dividend yield of 1.9%. First Capital pays an annual dividend of $1.08 per share and has a dividend yield of 3.8%. Sound Financial Bancorp pays out 32.6% of its earnings in the form of a dividend. First Capital pays out 30.3% 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 increased its dividend for 1 consecutive years and First Capital has increased its dividend for 1 consecutive years. First Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Sound Financial Bancorp and First Capital’s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sound Financial Bancorp	$55.62 million	1.81	$7.44 million	$2.33	16.84
First Capital	$51.24 million	1.84	$12.79 million	$3.57	7.89

First Capital has lower revenue, but higher earnings than Sound Financial Bancorp. First Capital 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.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Sound Financial Bancorp	10.54%	6.03%	0.60%
First Capital	22.59%	12.47%	1.04%

Institutional & Insider Ownership

68.9% of Sound Financial Bancorp shares are held by institutional investors. Comparatively, 11.7% of First Capital shares are held by institutional investors. 12.6% of Sound Financial Bancorp shares are held by company insiders. Comparatively, 4.4% of First Capital shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of recent recommendations and price targets for Sound Financial Bancorp and First Capital, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sound Financial Bancorp	0	0	0	0	N/A
First Capital	0	0	0	0	N/A

Volatility & Risk

Sound Financial Bancorp has a beta of 0.6, meaning that its share price is 40% less volatile than the S&P 500. Comparatively, First Capital has a beta of 0.62, meaning that its share price is 38% less volatile than the S&P 500.

Summary

First Capital beats Sound Financial Bancorp on 9 of the 13 factors compared between the two stocks.

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. It operates branch offices in Seattle, Tacoma, Mountlake Terrace, Sequim, Port Angeles, Port Ludlow, and University Place; and loan production office in the Madison Park neighborhood of Seattle, Washington. The company was founded in 1953 and is headquartered in Seattle, Washington.

About First Capital

First Capital, Inc. operates as the bank holding company for First Harrison Bank that provides various banking services to individuals and business customers. The company offers various deposit instruments, including non-interest-bearing checking accounts, negotiable order of withdrawal accounts, money market accounts, regular savings accounts, certificates of deposit, and retirement savings plans. It also provides residential mortgage loans, construction loans for residential and commercial properties, and commercial real estate loans, as well as commercial business loans. In addition, the company originates mortgage loans for sale in the secondary market and sells non-deposit investment products; and offers various secured or guaranteed consumer loans comprising automobile and truck loans, home equity loans, home improvement loans, boat loans, mobile home loans, credit cards and other personal loans, and loans secured by savings deposits, as well as unsecured consumer loans. First Capital, Inc. was founded in 1891 and is based in Corydon, Indiana.