Critical Comparison: First Horizon (NYSE:FHN) & Prosperity Bancshares (NYSE:PB)

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

Dividends

First Horizon pays an annual dividend of $0.60 per share and has a dividend yield of 2.5%. Prosperity Bancshares pays an annual dividend of $2.40 per share and has a dividend yield of 3.4%. First Horizon pays out 31.9% of its earnings in the form of a dividend. Prosperity Bancshares pays out 41.9% 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. Prosperity Bancshares has raised its dividend for 27 consecutive years. Prosperity Bancshares is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk & Volatility

First Horizon has a beta of 0.63, meaning that its stock price is 37% less volatile than the S&P 500. Comparatively, Prosperity Bancshares has a beta of 0.67, meaning that its stock price is 33% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
First Horizon	19.67%	11.21%	1.19%
Prosperity Bancshares	31.22%	7.11%	1.40%

Analyst Ratings

This is a summary of current recommendations for First Horizon and Prosperity Bancshares, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First Horizon	0	10	9	1	2.55
Prosperity Bancshares	1	7	7	0	2.40

First Horizon presently has a consensus target price of $26.63, suggesting a potential upside of 10.53%. Prosperity Bancshares has a consensus target price of $78.77, suggesting a potential upside of 11.85%. Given Prosperity Bancshares’ higher possible upside, analysts plainly believe Prosperity Bancshares is more favorable than First Horizon.

Valuation and Earnings

This table compares First Horizon and Prosperity Bancshares”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First Horizon	$5.00 billion	2.37	$982.00 million	$1.88	12.82
Prosperity Bancshares	$1.74 billion	3.85	$542.84 million	$5.73	12.29

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

Institutional and Insider Ownership

80.3% of First Horizon shares are owned by institutional investors. Comparatively, 80.7% of Prosperity Bancshares shares are owned by institutional investors. 1.0% of First Horizon 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 large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Summary

Prosperity Bancshares beats First Horizon on 10 of the 18 factors compared between the two stocks.

About First Horizon

First Horizon Corporation operates as the bank holding company for First Horizon Bank that provides various financial services. The company operates through Regional Banking and Specialty Banking segments. It offers general banking services for consumers, businesses, financial institutions, and governments. The company also accepts deposits; provides underwriting services for bank-eligible securities and other fixed-income securities by financial subsidiaries; sells loans and derivatives; financial planning; and offers investment and financial advisory services. In addition, it offers mortgage banking; loan syndications; brokerage services; commercial and business banking for business enterprises, consumer banking, and private client and wealth management services; capital markets, professional commercial real estate, mortgage warehouse and asset-based lending, franchise and equipment finance, tax credit finance, energy and healthcare finance, asset management, and corporate and correspondent banking services. Further, the company provides transaction processing services including check clearing services and remittance processing, credit cards, investment, and sale of mutual fund and retail insurances, as well as trust, fiduciary, and agency services. First Horizon Corporation was founded in 1864 and is headquartered in Memphis, Tennessee.

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.