Critical Review: Peoples Financial (OTCMKTS:PFBX) and First Business Financial Services (NASDAQ:FBIZ)

Peoples Financial (OTCMKTS:PFBX) and First Business Financial Services (NASDAQ:FBIZ) are both small-cap finance companies, but which is the better stock? We will compare the two companies based on the strength of their institutional ownership, risk, valuation, dividends, analyst recommendations, earnings and profitability.

Valuation and Earnings

This table compares Peoples Financial and First Business Financial Services”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Peoples Financial	$39.52 million	2.29	$21.70 million	$4.42	4.43
First Business Financial Services	$158.03 million	2.53	$44.24 million	$5.50	8.73

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

Profitability

This table compares Peoples Financial and First Business Financial Services’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Peoples Financial	54.68%	26.99%	2.51%
First Business Financial Services	16.86%	14.33%	1.16%

Risk and Volatility

Peoples Financial has a beta of 0.49, suggesting that its share price is 51% less volatile than the S&P 500. Comparatively, First Business Financial Services has a beta of 0.66, suggesting that its share price is 34% less volatile than the S&P 500.

Dividends

Peoples Financial pays an annual dividend of $0.36 per share and has a dividend yield of 1.8%. First Business Financial Services pays an annual dividend of $1.16 per share and has a dividend yield of 2.4%. Peoples Financial pays out 8.1% of its earnings in the form of a dividend. First Business Financial Services pays out 21.1% 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 Business Financial Services has increased its dividend for 13 consecutive years. First Business Financial Services is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a breakdown of recent ratings for Peoples Financial and First Business Financial Services, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Peoples Financial	0	0	0	0	0.00
First Business Financial Services	0	0	4	0	3.00

First Business Financial Services has a consensus target price of $57.25, indicating a potential upside of 19.27%. Given First Business Financial Services’ stronger consensus rating and higher possible upside, analysts plainly believe First Business Financial Services is more favorable than Peoples Financial.

Insider & Institutional Ownership

32.8% of Peoples Financial shares are held by institutional investors. Comparatively, 60.1% of First Business Financial Services shares are held by institutional investors. 28.1% of Peoples Financial shares are held by insiders. Comparatively, 5.1% of First Business Financial Services shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Summary

First Business Financial Services beats Peoples Financial on 12 of the 17 factors compared between the two stocks.

About Peoples Financial

Peoples Financial Corporation operates as the bank holding company for The Peoples Bank that provides banking, financial, and trust services to government entities, individuals, and small and commercial businesses in Mississippi. The company accepts various deposits, such as interest and non-interest-bearing checking accounts, savings accounts, certificates of deposit, and individual retirement accounts (IRAs). It offers business, commercial, real estate, construction, personal, and installment loans; and personal trust, agencies, and estate services, including living and testamentary trusts, executorships, guardianships, and conservatorships. In addition, the company provides self-directed IRAs; and escrow management, stock transfer, and bond paying agency accounts to corporate customers. Further, it offers other services consisting of safe deposit box rental, wire transfer, night drop facilities, collection, cash management, and Internet banking services. the company provides services to customers of various industries, such as seafood, retail, hospitality, hotel/motel, gaming, and construction. Peoples Financial Corporation was founded in 1896 and is headquartered in Biloxi, Mississippi.

About First Business Financial Services

First Business Financial Services, Inc. operates as the bank holding company for First Business Bank that provides commercial banking products and services for small and medium-sized businesses, business owners, executives, professionals, and high net worth individuals in Wisconsin, Kansas, and Missouri. The company offers real estate lending, commercial and industrial lending, asset-based lending, accounts receivable financing, equipment financing loans and leases, floorplan financing, vendor financing, small business administration lending and servicing, treasury management solutions, and company retirement services. It also provides private wealth management for individuals, including creating and executing asset allocation strategies, trust and estate administration, financial planning, investment management, and access to brokerage and custody-only services. In addition, the company offers bank consulting consisting of investment portfolio administrative and asset liability management services, and commercial deposit accounts. The company was founded in 1909 and is headquartered in Madison, Wisconsin.