Preferred Bank (NASDAQ: CBFP – Get a rating) and German American Bancorp (NASDAQ: GABC – Get a rating) are both small cap finance companies, but which is the better investment? We’ll compare the two companies based on valuation strength, analyst recommendations, profitability, earnings, dividends, risk and institutional ownership.
Institutional and insider ownership
72.9% of Preferred Bank shares are held by institutional investors. By comparison, 43.0% of German American Bancorp’s shares are held by institutional investors. 6.7% of German American Bancorp shares are held by insiders of the company. Strong institutional ownership is an indication that endowments, hedge funds, and large money managers believe a company is poised for long-term growth.
This table compares the net margins, return on equity and return on assets of Preferred Bank and German American Bancorp.
|Net margins||Return on equity||return on assets|
Preferred Bank pays an annual dividend of $1.72 per share and has a dividend yield of 2.4%. German American Bancorp pays an annual dividend of $0.92 per share and has a dividend yield of 2.4%. Preferred Bank pays 26.8% of its profits as a dividend. German American Bancorp pays 28.9% of its profits as a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings over the next few years. Preferred Bank increased its dividend for 1 consecutive year and German American Bancorp increased its dividend for 10 consecutive years. German American Bancorp is clearly the better dividend-paying stock, given its higher yield and longer history of dividend growth.
Valuation and benefits
This chart compares earnings, earnings per share (EPS), and valuation of Preferred Bank and German American Bancorp.
|Gross revenue||Price/sales ratio||Net revenue||Earnings per share||Price/earnings ratio|
|Preferred bank||$218.78 million||4.96||$95.24 million||$6.42||11.22|
|German-American Bancorp||$229.84 million||4.86||$84.14 million||$3.18||11.95|
Preferred Bank has higher earnings, but lower revenue than German American Bancorp. Preferred Bank trades at a lower price-to-earnings ratio than German American Bancorp, indicating that it is currently the more affordable of the two shares.
This is a summary of current recommendations and price targets for Preferred Bank and German American Bancorp, as reported by MarketBeat.
|Sales Ratings||Hold odds||Buy reviews||Strong buy odds||Rating|
|German-American Bancorp||0||0||0||0||N / A|
Preferred Bank currently has a consensus target price of $89.60, suggesting a potential upside of 24.38%. Given Preferred Bank’s possible higher upside, equity research analysts clearly believe that Preferred Bank is more favorable than German American Bancorp.
Volatility and risk
Preferred Bank has a beta of 1.27, indicating its stock price is 27% more volatile than the S&P 500. In comparison, German American Bancorp has a beta of 0.65, indicating its stock price is 35 % less volatile than the S&P 500.
Preferred Bank beats German American Bancorp on 11 out of 16 factors compared between the two stocks.
About Preferred Bank (Get a rating)
Preferred Bank provides a variety of commercial banking products and services to small and medium-sized businesses and their owners, entrepreneurs, real estate developers and investors, professionals and high net worth individuals in the United States. The company accepts checking, savings and money market deposit accounts; fixed-rate, fixed-maturity certificates of deposit for individuals and individuals; and individual retirement accounts. It also provides real estate mortgage loans secured by commercial, industrial, office, special purpose, and single and multi-family residential properties; housing construction loans; and commercial loans including working capital lines of credit, term loans for capital expenditures and commercial and standby letters of credit; and SBA loans. In addition, the Company offers trade finance services, including trade and export letters of credit, import lines of credit, documentary collections, international wire transfers, acceptances/ trust receipts, export financing, documentary collections and invoice purchase programs. Also, it provides various banking services to wealthy individuals residing in the Pacific Rim area; and remote deposit taking, and online and mobile banking. In addition, the company offers various banking services to doctors, accountants, lawyers, business owners and other professionals; and safe deposit boxes, account reconciliation, courier service and cash management services to manufacturing, service and distribution companies. As of December 31, 2021, it had eleven full-service branches in Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine, Diamond Bar, Pico Rivera, Tarzana and San Francisco; and a branch in Flushing, New York. The company was incorporated in 1991 and is headquartered in Los Angeles, California.
About German American Bancorp (Get a rating)
German American Bancorp, Inc. operates as a bank holding company for German American Bank which provides retail and commercial banking services. The Company operates through three segments: Core Banking, Wealth Management Services and Insurance Operations. The Core Banking segment accepts deposits from the general public; and issues consumer, commercial and agricultural, commercial and agricultural real estate and residential mortgages, as well as sells residential mortgages in the secondary market. The Wealth Management segment provides trust, investment advisory, brokerage and retirement planning services. The Insurance Operations segment provides a range of property and casualty insurance products to individuals and businesses. As of December 31, 2021, the company operated 77 banking offices in 19 contiguous southern Indiana counties; and 14 Kentucky counties. German American Bancorp, Inc. was founded in 1910 and is based in Jasper, Indiana.
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