Peoples Financial (OTCMKTS:PFBX) versus First Community (NASDAQ:FCCO) Critical Review

First Community (NASDAQ:FCCO) and Peoples Financial (OTCMKTS:PFBX) are both small-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their risk, institutional ownership, valuation, profitability, earnings, analyst recommendations and dividends.

Dividends

First Community pays an annual dividend of $0.64 per share and has a dividend yield of 2.2%. Peoples Financial pays an annual dividend of $0.36 per share and has a dividend yield of 1.8%. First Community pays out 26.7% of its earnings in the form of a dividend. Peoples Financial pays out 35.3% 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. First Community has increased its dividend for 4 consecutive years. First Community is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider & Institutional Ownership

61.3% of First Community shares are held by institutional investors. Comparatively, 32.8% of Peoples Financial shares are held by institutional investors. 5.9% of First Community shares are held by company insiders. Comparatively, 28.1% of Peoples Financial shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares First Community and Peoples Financial”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First Community	$71.89 million	3.12	$13.95 million	$2.40	12.14
Peoples Financial	$40.11 million	2.33	$21.70 million	$1.02	19.85

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
First Community	16.69%	12.70%	0.95%
Peoples Financial	52.05%	5.04%	0.58%

Risk and Volatility

First Community has a beta of 0.51, meaning that its stock price is 49% less volatile than the S&P 500. Comparatively, Peoples Financial has a beta of 0.49, meaning that its stock price is 51% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and price targets for First Community and Peoples Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First Community	0	1	3	1	3.00
Peoples Financial	0	0	0	0	0.00

First Community presently has a consensus target price of $29.67, suggesting a potential upside of 1.84%. Given First Community’s stronger consensus rating and higher probable upside, analysts clearly believe First Community is more favorable than Peoples Financial.

Summary

First Community beats Peoples Financial on 14 of the 18 factors compared between the two stocks.

About First Community

First Community Corporation operates as the bank holding company for First Community Bank that provides various commercial and retail banking products and services to small-to-medium sized businesses, professionals, and individuals. The company operates through Commercial and Retail Banking, Mortgage Banking, and Investment Advisory and Non-Deposit segments. Its deposit products include checking, NOW, savings, and individual retirement accounts; and demand deposits, as well as other time deposits, such as daily money market accounts and longer-term certificates of deposit. The company's loan portfolio comprises commercial loans that include secured and unsecured loans for working capital, business expansion, and the purchase of equipment and machinery; consumer loans, including secured and unsecured loans for financing automobiles, home improvements, education, and personal investments; real estate construction and acquisition loans; and fixed and variable rate mortgage loans. It also provides online banking, internet banking, cash management, safe deposit boxes, direct deposit of payroll and social security checks, and automatic drafts for various accounts. In addition, the company offers non-deposit investment products and other investment brokerage services; VISA and MasterCard credit card services; investment advisory services; and insurance services. The company was incorporated in 1994 and is headquartered in Lexington, South Carolina.

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.