Analyzing Hanmi Financial (NASDAQ:HAFC) and FS Bancorp (NASDAQ:FSBW)

FS Bancorp (NASDAQ:FSBW) and Hanmi Financial (NASDAQ:HAFC) are both small-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their valuation, risk, profitability, institutional ownership, earnings, dividends and analyst recommendations.

Insider and Institutional Ownership

63.9% of FS Bancorp shares are held by institutional investors. Comparatively, 88.7% of Hanmi Financial shares are held by institutional investors. 12.7% of FS Bancorp shares are held by company insiders. Comparatively, 1.6% of Hanmi Financial shares are held by company 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.

Profitability

This table compares FS Bancorp and Hanmi Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
FS Bancorp	15.19%	11.08%	1.05%
Hanmi Financial	17.10%	9.85%	0.97%

Dividends

FS Bancorp pays an annual dividend of $1.16 per share and has a dividend yield of 3.0%. Hanmi Financial pays an annual dividend of $1.12 per share and has a dividend yield of 4.3%. FS Bancorp pays out 27.1% of its earnings in the form of a dividend. Hanmi Financial pays out 44.6% 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. FS Bancorp has raised its dividend for 12 consecutive years and Hanmi Financial has raised its dividend for 1 consecutive years.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for FS Bancorp and Hanmi Financial, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
FS Bancorp	0	1	1	0	2.50
Hanmi Financial	0	3	2	0	2.40

FS Bancorp currently has a consensus target price of $46.00, indicating a potential upside of 17.35%. Hanmi Financial has a consensus target price of $31.33, indicating a potential upside of 19.96%. Given Hanmi Financial’s higher possible upside, analysts plainly believe Hanmi Financial is more favorable than FS Bancorp.

Risk and Volatility

FS Bancorp has a beta of 0.71, indicating that its share price is 29% less volatile than the S&P 500. Comparatively, Hanmi Financial has a beta of 0.74, indicating that its share price is 26% less volatile than the S&P 500.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
FS Bancorp	$219.52 million	1.34	$33.35 million	$4.28	9.16
Hanmi Financial	$444.90 million	1.75	$76.09 million	$2.51	10.41

Hanmi Financial has higher revenue and earnings than FS Bancorp. FS Bancorp is trading at a lower price-to-earnings ratio than Hanmi Financial, indicating that it is currently the more affordable of the two stocks.

Summary

Hanmi Financial beats FS Bancorp on 10 of the 17 factors compared between the two stocks.

About FS Bancorp

FS Bancorp, Inc. operates as a bank holding company for 1st Security Bank of Washington that provides banking and financial services to local families, local and regional businesses, and industry niches. The company operates in two segments, Commercial and Consumer Banking; and Home Lending. It offers various deposit instruments, including checking accounts, money market deposit accounts, savings accounts, and certificates of deposit. The company provides one-to-four-family residential first mortgages, second mortgage/home equity loan products, non-mortgage commercial business loans, commercial real estate loans, and construction and development loans, as well as consumer loans, which primarily include personal lines of credit, credit cards, automobile, direct home improvement, loans on deposit, and recreational loans. It operates full bank service branches and home loan production offices in suburban communities in the greater Puget Sound area, including Snohomish, King, Pierce, Jefferson, Kitsap, Clallam, Grays Harbor, and Thurston counties; and a loan production office in the market area of the Tri-Cities. FS Bancorp, Inc. was founded in 1936 and is headquartered in Mountlake Terrace, Washington.

About Hanmi Financial

Hanmi Financial Corporation operates as the holding company for Hanmi Bank that provides business banking products and services in the United States. It offers various deposit products, including noninterest-bearing checking accounts, savings accounts, negotiable order of withdrawal accounts, money market accounts, and certificates of deposit. The company also provides real estate loans, such as commercial property, construction, and residential property loans; and commercial and industrial loans, such as commercial term loans and commercial lines of credit; and international finance and trade services and products, such as letters of credit, and import and export financing. In addition, it offers small business administration loans for business purposes, which comprise owner-occupied commercial real estate, business acquisitions, start-ups, franchise financing, working capital, improvements and renovations, inventory and equipment, and debt-refinancing, as well as equipment lease financing. The company was founded in 1982 and is headquartered in Los Angeles, California.