Financial Review: Cathay General Bancorp (NASDAQ:CATY) versus Sound Financial Bancorp (NASDAQ:SFBC)

Cathay General Bancorp (NASDAQ:CATY) and Sound Financial Bancorp (NASDAQ:SFBC) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, risk, analyst recommendations, earnings, valuation, dividends and institutional ownership.

Earnings and Valuation

This table compares Cathay General Bancorp and Sound Financial Bancorp”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Cathay General Bancorp	$1.38 billion	3.03	$315.12 million	$5.12	12.22
Sound Financial Bancorp	$61.52 million	1.88	$7.16 million	$2.93	15.40

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

Dividends

Cathay General Bancorp pays an annual dividend of $1.52 per share and has a dividend yield of 2.4%. Sound Financial Bancorp pays an annual dividend of $0.84 per share and has a dividend yield of 1.9%. Cathay General Bancorp pays out 29.7% of its earnings in the form of a dividend. Sound Financial Bancorp pays out 28.7% 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. Sound Financial Bancorp has increased its dividend for 2 consecutive years.

Profitability

This table compares Cathay General Bancorp and Sound Financial Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Cathay General Bancorp	24.66%	11.71%	1.43%
Sound Financial Bancorp	12.19%	6.99%	0.70%

Insider and Institutional Ownership

75.0% of Cathay General Bancorp shares are held by institutional investors. Comparatively, 68.8% of Sound Financial Bancorp shares are held by institutional investors. 4.5% of Cathay General Bancorp shares are held by insiders. Comparatively, 12.3% of Sound Financial Bancorp shares are held by 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.

Volatility and Risk

Cathay General Bancorp has a beta of 0.86, suggesting that its stock price is 14% less volatile than the S&P 500. Comparatively, Sound Financial Bancorp has a beta of 0.01, suggesting that its stock price is 99% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and target prices for Cathay General Bancorp and Sound Financial Bancorp, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Cathay General Bancorp	1	3	1	1	2.33
Sound Financial Bancorp	0	1	0	0	2.00

Cathay General Bancorp currently has a consensus target price of $62.25, suggesting a potential downside of 0.50%. Given Cathay General Bancorp’s stronger consensus rating and higher possible upside, equities analysts plainly believe Cathay General Bancorp is more favorable than Sound Financial Bancorp.

Summary

Cathay General Bancorp beats Sound Financial Bancorp on 14 of the 18 factors compared between the two stocks.

About Cathay General Bancorp

Cathay General Bancorp operates as the holding company for Cathay Bank that offers various commercial banking products and services to individuals, professionals, and small to medium-sized businesses in the United States. The company offers various deposit products, including passbook accounts, checking accounts, money market deposit accounts, certificates of deposit, individual retirement accounts, and public funds deposits. It also provides loan products, such as commercial mortgage loans, commercial loans, small business administration loans, residential mortgage loans, real estate construction loans, and home equity lines of credit, as well as installment loans to individuals for household, and other consumer expenditures. In addition, the company offers trade financing, letter of credit, wire transfer, forward currency spot and forward contract, safe deposit, collection, automatic teller machine, Internet banking, investment, and other customary bank services, as well as securities and insurance products. Cathay General Bancorp was founded in 1962 and is headquartered in Los Angeles, California.

About Sound Financial Bancorp

Sound Financial Bancorp, Inc. operates as the bank holding company for Sound Community Bank that provides banking and other financial services for consumers and businesses. It accepts various deposits products comprising savings, money market deposit, NOW, and demand accounts, as well as certificates of deposit. The company also offers loans secured by first and second mortgages on one-to four-family residences; home equity loans, including fixed-rate loans and variable-rate lines of credit; commercial and multifamily real estate loans; construction loans secured by single-family residences, and commercial and multifamily real estate; land loans; commercial business loans to finance commercial vehicles and equipment, as well as loans secured by accounts receivable and/or inventory; and secured and unsecured consumer loans, such as new and used manufactured homes, floating homes, automobiles, boats, and recreational vehicle loans, and loans secured by deposit accounts. The company was founded in 1953 and is headquartered in Seattle, Washington.