Financial Analysis: Avidbank (OTCMKTS:AVBH) & Heritage Commerce (NASDAQ:HTBK)

Avidbank (OTCMKTS:AVBH) and Heritage Commerce (NASDAQ:HTBK) are both small-cap finance companies, but which is the better stock? We will contrast the two companies based on the strength of their dividends, risk, earnings, analyst recommendations, valuation, institutional ownership and profitability.

Profitability

This table compares Avidbank and Heritage Commerce’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Avidbank	14.31%	N/A	N/A
Heritage Commerce	15.00%	6.61%	0.82%

Institutional and Insider Ownership

15.9% of Avidbank shares are held by institutional investors. Comparatively, 75.6% of Heritage Commerce shares are held by institutional investors. 2.7% of Heritage Commerce shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Avidbank and Heritage Commerce, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Avidbank	0	0	2	0	3.00
Heritage Commerce	0	0	2	0	3.00

Avidbank presently has a consensus target price of $25.50, indicating a potential upside of 5.37%. Heritage Commerce has a consensus target price of $10.6667, indicating a potential upside of 10.08%. Given Heritage Commerce’s higher probable upside, analysts plainly believe Heritage Commerce is more favorable than Avidbank.

Valuation and Earnings

This table compares Avidbank and Heritage Commerce”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Avidbank	$47.45 million	5.37	$21.01 million	$2.78	8.71
Heritage Commerce	$251.45 million	2.37	$40.53 million	$0.63	15.38

Heritage Commerce has higher revenue and earnings than Avidbank. Avidbank is trading at a lower price-to-earnings ratio than Heritage Commerce, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Avidbank has a beta of 0.53, indicating that its stock price is 47% less volatile than the S&P 500. Comparatively, Heritage Commerce has a beta of 0.85, indicating that its stock price is 15% less volatile than the S&P 500.

Summary

Heritage Commerce beats Avidbank on 10 of the 12 factors compared between the two stocks.

About Avidbank

Avidbank Holdings, Inc. operates as a bank holding company for Avidbank that provides financial products and services to businesses and individuals in the Santa Clara, San Mateo, and San Francisco counties. The company offers business and personal deposit products, such as checking, money market, and savings accounts; and certificates of deposit. It also provides personal lending products, including secured and unsecured lines of credit, home equity lines of credit, remodel and new home construction loans, and term loans; corporate banking comprising working capital lines of credit, equipment loans, acquisition financing, shareholder buyouts, ESOP loans, and owner-occupied real estate loans; and commercial real estate lending, such as permanent loans and bridge financing products. In addition, the company offers construction lending products, including land acquisition loans, pre-development loans, construction spec SFD, owner-occupied SFD, condominiums, subdivision, unsecured business lines, real estate bridge loans, and RLOC real estate secured loans. Further, it provides various financing solutions, such as fund finance, structured finance, venture lending, asset-based lending, and sponsor finance. Additionally, the company offers various services, such as automated clearing house payments and collections, bill pay, positive pay, wire transfer, lockbox, merchant, remote deposit capture, risk and fraud analytics services, ATM/debit cards, credit cards, business courier, cash management, and complimentary notary services. Furthermore, it offers online and mobile banking services. The company was founded in 2003 and is headquartered in San Jose, California.

About Heritage Commerce

Heritage Commerce Corp operates as the bank holding company for Heritage Bank of Commerce that provides various commercial and personal banking services to residents and the business/professional community in California. Its deposit products for business banking and retail markets include interest and non-interest-bearing demand, savings, and money market accounts, as well as certificates of deposit and time deposits. The company’s loan portfolio comprises commercial loans, such as operating secured and unsecured loans advanced for working capital, equipment purchases, and other business purposes; commercial real estate loans; commercial construction loans for rental properties, commercial buildings, and homes; small business administration loans; home equity lines of credit; multifamily loans on residential properties; residential mortgage loans; and consumer loans consisting of loans for financing automobiles, various consumer goods, and other personal purposes. In addition, it offers other banking services, including cashier’s checks, bank by mail, night depositories, safe deposit boxes, direct deposit, automated payroll, electronic funds transfer, online bill pay, homeowner association, remote deposit capture, automated clearing house origination, electronic data interchange, and check imaging services, as well as other customary banking, factoring financing, and electronic banking services. Heritage Commerce Corp was founded in 1994 and is headquartered in San Jose, California.