Head to Head Review: Preferred Bank (NASDAQ:PFBC) versus Sierra Bancorp (NASDAQ:BSRR)

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Preferred Bank	24.87%	16.88%	1.83%
Sierra Bancorp	19.92%	11.38%	1.11%

Earnings and Valuation

This table compares Preferred Bank and Sierra Bancorp”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Preferred Bank	$522.66 million	2.42	$130.66 million	$9.42	9.31
Sierra Bancorp	$203.87 million	1.98	$40.56 million	$2.82	10.34

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

Risk & Volatility

Preferred Bank has a beta of 0.7, meaning that its stock price is 30% less volatile than the S&P 500. Comparatively, Sierra Bancorp has a beta of 0.74, meaning that its stock price is 26% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent recommendations for Preferred Bank and Sierra Bancorp, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Preferred Bank	0	2	1	0	2.33
Sierra Bancorp	0	1	1	0	2.50

Preferred Bank currently has a consensus target price of $92.33, suggesting a potential upside of 5.32%. Sierra Bancorp has a consensus target price of $33.50, suggesting a potential upside of 14.88%. Given Sierra Bancorp’s stronger consensus rating and higher probable upside, analysts plainly believe Sierra Bancorp is more favorable than Preferred Bank.

Dividends

Preferred Bank pays an annual dividend of $3.00 per share and has a dividend yield of 3.4%. Sierra Bancorp pays an annual dividend of $1.00 per share and has a dividend yield of 3.4%. Preferred Bank pays out 31.8% of its earnings in the form of a dividend. Sierra Bancorp pays out 35.5% 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 increased its dividend for 5 consecutive years and Sierra Bancorp has increased its dividend for 2 consecutive years.

Insider and Institutional Ownership

72.8% of Preferred Bank shares are owned by institutional investors. Comparatively, 55.4% of Sierra Bancorp shares are owned by institutional investors. 11.9% of Sierra Bancorp shares are owned by 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

Preferred Bank beats Sierra Bancorp on 10 of the 16 factors compared between the two stocks.

About Preferred Bank

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. 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; commercial loans comprising lines of credit for working capital, term loans for capital expenditures, and commercial and stand-by letters of credit; and small business administration 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, and bills purchase programs. Further, it provides cash management services; and internet, mobile, and tablet banking services. The company operates through full-service branch offices in the California counties of Los Angeles, Orange and San Francisco; Flushing, New York; Houston suburb of Sugar Land, Texas; and a satellite office in Manhattan, New York. The company was incorporated in 1991 and is headquartered in Los Angeles, California.

About Sierra Bancorp

Sierra Bancorp operates as the bank holding company for Bank of the Sierra that provides retail and commercial banking services to individuals and businesses in California. It accepts various deposit products, such as checking accounts, savings accounts, money market demand accounts, time deposits, retirement accounts, and sweep accounts. The company's loan products include agricultural, commercial, consumer, real estate, construction, and mortgage loans. It also offers automated teller machines; electronic point-of-sale payment alternatives; online and automated telephone banking services; and remote deposit capture and automated payroll services for business customers. Sierra Bancorp was founded in 1977 and is headquartered in Porterville, California.