Financial Analysis: Southside Bancshares (NYSE:SBSI) and Prosperity Bancshares (NYSE:PB)

Southside Bancshares (NYSE:SBSI) and Prosperity Bancshares (NYSE:PB) are both finance companies, but which is the superior business? We will compare the two businesses based on the strength of their profitability, valuation, risk, institutional ownership, earnings, analyst recommendations and dividends.

Valuation and Earnings

This table compares Southside Bancshares and Prosperity Bancshares”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Southside Bancshares	$456.07 million	1.99	$88.49 million	$2.82	10.70
Prosperity Bancshares	$1.79 billion	3.50	$479.39 million	$5.50	11.98

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

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Southside Bancshares and Prosperity Bancshares, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Southside Bancshares	0	0	0	0	0.00
Prosperity Bancshares	0	7	10	0	2.59

Prosperity Bancshares has a consensus target price of $83.13, suggesting a potential upside of 26.16%. Given Prosperity Bancshares’ stronger consensus rating and higher probable upside, analysts clearly believe Prosperity Bancshares is more favorable than Southside Bancshares.

Dividends

Southside Bancshares pays an annual dividend of $1.44 per share and has a dividend yield of 4.8%. Prosperity Bancshares pays an annual dividend of $2.32 per share and has a dividend yield of 3.5%. Southside Bancshares pays out 51.1% of its earnings in the form of a dividend. Prosperity Bancshares pays out 42.2% 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. Southside Bancshares has increased its dividend for 30 consecutive years and Prosperity Bancshares has increased its dividend for 27 consecutive years. Southside Bancshares is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Southside Bancshares has a beta of 0.7, meaning that its share price is 30% less volatile than the S&P 500. Comparatively, Prosperity Bancshares has a beta of 0.74, meaning that its share price is 26% less volatile than the S&P 500.

Institutional and Insider Ownership

55.7% of Southside Bancshares shares are owned by institutional investors. Comparatively, 80.7% of Prosperity Bancshares shares are owned by institutional investors. 6.0% of Southside Bancshares shares are owned by company insiders. Comparatively, 4.2% of Prosperity Bancshares shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Southside Bancshares and Prosperity Bancshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Southside Bancshares	19.07%	10.59%	1.02%
Prosperity Bancshares	29.37%	6.99%	1.33%

Summary

Prosperity Bancshares beats Southside Bancshares on 13 of the 17 factors compared between the two stocks.

About Southside Bancshares

Southside Bancshares, Inc. operates as the bank holding company for Southside Bank that provides a range of financial services to individuals, businesses, municipal entities, and nonprofit organizations. Its deposit products include savings, money market, and interest and noninterest bearing checking accounts, as well as certificates of deposit. The company’s loan portfolio comprises consumer loans that include 1-4 family residential loans, home equity loans, home improvement loans, automobile loans, and other consumer related loans; commercial loans, such as short-term working capital loans for inventory and accounts receivable, short and medium-term loans for equipment or other business capital expansion, commercial real estate loans, and municipal loans; and construction loans for 1-4 family residential and commercial real estate. It also offers wealth management and trust services consisting of investment management, administration, revocable and testamentary trusts, and custodian services for individuals, partnerships, and corporations; safe deposit services; and brokerage services. As of December 31, 2021, the company operated through 56 banking facilities and 73 ATMs/ITMs. Southside Bancshares, Inc. was founded in 1960 and is headquartered in Tyler, Texas.

About Prosperity Bancshares

Prosperity Bancshares, Inc. operates as bank holding company for the Prosperity Bank that provides financial products and services to businesses and consumers. It accepts various deposit products, such as demand, savings, money market, and time accounts, as well as and certificates of deposit. The company also offers 1-4 family residential mortgage, commercial real estate and multifamily residential, commercial and industrial, agricultural, and non-real estate agricultural loans, as well as construction, land development, and other land loans; consumer loans, including automobile, recreational vehicle, boat, home improvement, personal, and deposit account collateralized loans; term loans and lines of credit; and consumer durables and home equity loans, as well as loans for working capital, business expansion, and purchase of equipment and machinery. In addition, it provides internet banking, mobile banking, trust and wealth management, retail brokerage, mortgage services, and treasury management, as well as debit and credit cards. The company was incorporated in 1983 and is headquartered in Houston, Texas.