Critical Review: Kearny Financial (NASDAQ:KRNY) vs. Heritage Financial (NASDAQ:HFWA)

Heritage Financial (NASDAQ:HFWA) and Kearny Financial (NASDAQ:KRNY) are both small-cap finance companies, but which is the better stock? We will compare the two businesses based on the strength of their valuation, risk, institutional ownership, analyst recommendations, earnings, profitability and dividends.

Volatility & Risk

Heritage Financial has a beta of 0.52, indicating that its share price is 48% less volatile than the S&P 500. Comparatively, Kearny Financial has a beta of 0.72, indicating that its share price is 28% less volatile than the S&P 500.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Heritage Financial	$317.18 million	2.62	$43.26 million	$1.65	14.82
Kearny Financial	$343.53 million	1.43	$26.08 million	$0.47	16.13

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

Profitability

This table compares Heritage Financial and Kearny Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Heritage Financial	17.27%	8.21%	1.03%
Kearny Financial	8.57%	3.89%	0.38%

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Heritage Financial and Kearny Financial, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Heritage Financial	0	3	2	0	2.40
Kearny Financial	0	2	1	0	2.33

Heritage Financial presently has a consensus price target of $29.33, suggesting a potential upside of 19.97%. Kearny Financial has a consensus price target of $8.00, suggesting a potential upside of 5.54%. Given Heritage Financial’s stronger consensus rating and higher probable upside, analysts plainly believe Heritage Financial is more favorable than Kearny Financial.

Dividends

Heritage Financial pays an annual dividend of $0.96 per share and has a dividend yield of 3.9%. Kearny Financial pays an annual dividend of $0.44 per share and has a dividend yield of 5.8%. Heritage Financial pays out 58.2% of its earnings in the form of a dividend. Kearny Financial pays out 93.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Heritage Financial has raised its dividend for 14 consecutive years.

Insider & Institutional Ownership

78.3% of Heritage Financial shares are held by institutional investors. Comparatively, 71.0% of Kearny Financial shares are held by institutional investors. 1.8% of Heritage Financial shares are held by insiders. Comparatively, 7.4% of Kearny Financial shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Summary

Heritage Financial beats Kearny Financial on 12 of the 17 factors compared between the two stocks.

About Heritage Financial

Heritage Financial Corporation operates as the bank holding company for Heritage Bank that provides various financial services to small and medium sized businesses and individuals in the United States. It accepts various deposit products, such as noninterest demand deposits, interest bearing demand deposits, money market accounts, savings accounts, personal checking accounts, and certificates of deposit. The company’s loan portfolio includes commercial and industrial loans, owner-occupied and non-owner occupied commercial real estate loans, one-to-four family residential loans, real estate construction and land development loans, consumer loans, commercial business loans, lines of credit, term equipment financing, and term real estate loans, as well as commercial business loans to a range of businesses in industries that include real estate and rental and leasing, healthcare, accommodation and food services, retail trade, and construction. It also originates loans that are guaranteed by the U.S. Small Business Administration; and provides objective advice from trusted advisers. The company was formerly known as Heritage Financial Corporation, M.H.C. and changed its name to Heritage Financial Corporation in 1998. Heritage Financial Corporation was founded in 1927 and is headquartered in Olympia, Washington.

About Kearny Financial

Kearny Financial Corp. operates as the holding company for Kearny Bank that provides various banking products and services in the United States. It offers various deposit products, including interest-bearing and non-interest-bearing checking accounts, money market deposit accounts, savings accounts, and certificates of deposit accounts. The company also provides various loans, such as multi-family and nonresidential real estate mortgage loans, commercial term loans and lines of credit, one- to four-family residential mortgage loans, and home equity loans and lines of credit; loans to individuals, builders, or developers for the construction of multi-family residential buildings or commercial real estate, or for the construction or renovation of one- to four-family residences; overdraft lines of credit; and personal loans. In addition, it engages in the investment activities. Kearny Financial Corp. was founded in 1884 and is headquartered in Fairfield, New Jersey.