Critical Analysis: TowneBank (NASDAQ:TOWN) and Eagle Financial Services (OTCMKTS:EFSI)

Eagle Financial Services (OTCMKTS:EFSI) and TowneBank (NASDAQ:TOWN) are both finance companies, but which is the better business? We will contrast the two companies based on the strength of their institutional ownership, analyst recommendations, risk, profitability, dividends, valuation and earnings.

Profitability

This table compares Eagle Financial Services and TowneBank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Eagle Financial Services	10.90%	10.38%	0.63%
TowneBank	14.89%	7.41%	0.91%

Analyst Recommendations

This is a summary of recent ratings for Eagle Financial Services and TowneBank, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Eagle Financial Services	0	0	0	0	0.00
TowneBank	0	0	2	0	3.00

TowneBank has a consensus target price of $36.00, suggesting a potential upside of 3.12%. Given TowneBank’s stronger consensus rating and higher possible upside, analysts plainly believe TowneBank is more favorable than Eagle Financial Services.

Valuation and Earnings

This table compares Eagle Financial Services and TowneBank”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Eagle Financial Services	$97.87 million	1.26	$9.36 million	$3.26	10.64
TowneBank	$941.58 million	2.78	$153.71 million	$1.99	17.54

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

Volatility and Risk

Eagle Financial Services has a beta of 0.47, meaning that its share price is 53% less volatile than the S&P 500. Comparatively, TowneBank has a beta of 0.89, meaning that its share price is 11% less volatile than the S&P 500.

Dividends

Eagle Financial Services pays an annual dividend of $1.24 per share and has a dividend yield of 3.6%. TowneBank pays an annual dividend of $1.00 per share and has a dividend yield of 2.9%. Eagle Financial Services pays out 38.0% of its earnings in the form of a dividend. TowneBank pays out 50.3% 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. TowneBank has raised its dividend for 12 consecutive years. Eagle Financial Services is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

0.3% of Eagle Financial Services shares are owned by institutional investors. Comparatively, 56.0% of TowneBank shares are owned by institutional investors. 12.3% of Eagle Financial Services shares are owned by company insiders. Comparatively, 8.1% of TowneBank shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Summary

TowneBank beats Eagle Financial Services on 12 of the 17 factors compared between the two stocks.

About Eagle Financial Services

Eagle Financial Services, Inc. operates as the bank holding company for Bank of Clarke that provides various retail and commercial banking products and services in the Shenandoah Valley, Northern Virginia and Frederick, Maryland. It operates through three segments: Community Banking, Marine Lending, and Wealth Management. The company's deposit products include checking, NOW, money market, and regular savings accounts; and demand and time deposits. Its loan portfolio comprises one-to-four-family residential real estate, commercial real estate, construction and land development, and commercial and industrial loans, as well as secured and unsecured consumer loans, which include personal installment loans, personal lines of credit, automobile loans, and credit card loans. The company also offers fiduciary services; advisory services and investment products, including individual retirement accounts, mutual funds, tax-deferred annuities, 529 college savings plans, life insurance, long term care insurance, brokerage certificates of deposit, and other brokerage services; non-deposit investment products; and title insurance products. In addition, it provides ATM and debit cards; online bill payment services; wealth management services; and telephone, internet, and mobile banking services, as well as other commercial deposit account services, such as ACH origination and remote deposit capture services. The company operates through full-service branches, loan production offices, drive-through only facility, and ATM locations in the Virginia communities of Berryville, Winchester, Boyce, Stephens City, Purcellville, Warrenton, Leesburg, Ashburn, and Fairfax, as well as Maryland community of Frederick. Eagle Financial Services, Inc. was founded in 1881 and is headquartered in Berryville, Virginia.

About TowneBank

TowneBank provides retail and commercial banking services for individuals, commercial enterprises, and professionals. The company operates through three segments: Banking, Realty, and Insurance. It accepts various deposits, including demand deposits, savings accounts, money rate savings, certificates of deposit, and individual retirement accounts. The company also offers secured and unsecured personal loans for financing automobiles, home improvements, education, and personal investments; commercial loans for working capital, business expansion, and equipment and machinery purchases; and mortgage loans, as well as real estate acquisition, development, and construction loans. In addition, it provides other services, such as safe deposit boxes, treasury management services, direct deposit of payroll and social security checks, and automatic drafts for various accounts, as well as online, mobile, and on-call banking services. Further, the company offers documentation services to accomplish tax deferral to investors; investment and asset management services; commercial mortgage brokerage services; and other financial services, such as financial, retirement, and estate planning services, as well as assistance on various investment options comprising alternative investments, annuities, margin accounts, convertible bonds, and pension and profit-sharing plans. Additionally, it provides residential real estate, relocation, property management, vacation rentals, and title and settlement services; and originates residential mortgage loans. The company also offers life, property, casualty, and vehicle insurance services; and employee benefit programs, such as health, dental, vision, and disability insurance. It operates in Richmond, Virginia, the Greater Hampton Roads region in southeastern Virginia, northeastern North Carolina, Raleigh, Charlotte, Greensboro, and Greenville, North Carolina. TowneBank was incorporated in 1998 and is based in Portsmouth, Virginia.