Preferred Bank (NASDAQ:PFBC) & Independent Bank Group (NASDAQ:IBTX) Financial Analysis

Preferred Bank (NASDAQ:PFBC) and Independent Bank Group (NASDAQ:IBTX) are both finance companies, but which is the superior business? We will compare the two companies based on the strength of their risk, analyst recommendations, valuation, profitability, earnings, institutional ownership and dividends.

Risk & Volatility

Preferred Bank has a beta of 0.94, suggesting that its stock price is 6% less volatile than the S&P 500. Comparatively, Independent Bank Group has a beta of 1.38, suggesting that its stock price is 38% more volatile than the S&P 500.

Institutional & Insider Ownership

72.8% of Preferred Bank shares are owned by institutional investors. Comparatively, 77.9% of Independent Bank Group shares are owned by institutional investors. 3.5% of Independent Bank Group shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares Preferred Bank and Independent Bank Group”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Preferred Bank	$281.54 million	4.81	$150.04 million	$9.98	9.39
Independent Bank Group	$471.74 million	5.68	$43.20 million	($10.46)	-6.18

Preferred Bank has higher earnings, but lower revenue than Independent Bank Group. Independent Bank Group is trading at a lower price-to-earnings ratio than Preferred Bank, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Preferred Bank and Independent Bank Group, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Preferred Bank	0	0	2	0	3.00
Independent Bank Group	0	2	4	0	2.67

Preferred Bank currently has a consensus price target of $99.50, suggesting a potential upside of 6.12%. Independent Bank Group has a consensus price target of $58.83, suggesting a potential downside of 9.03%. Given Preferred Bank’s stronger consensus rating and higher possible upside, analysts plainly believe Preferred Bank is more favorable than Independent Bank Group.

Profitability

This table compares Preferred Bank and Independent Bank Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Preferred Bank	26.20%	19.01%	2.01%
Independent Bank Group	-43.45%	4.49%	0.52%

Dividends

Preferred Bank pays an annual dividend of $2.80 per share and has a dividend yield of 3.0%. Independent Bank Group pays an annual dividend of $1.52 per share and has a dividend yield of 2.4%. Preferred Bank pays out 28.1% of its earnings in the form of a dividend. Independent Bank Group pays out -14.5% 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.

Summary

Preferred Bank beats Independent Bank Group on 9 of the 16 factors compared between the two stocks.

About Preferred Bank

Preferred Bank provides various commercial banking products and services to small and mid-sized businesses and their owners, entrepreneurs, real estate developers and investors, professionals, and high net worth individuals. The company accepts checking, savings, and money market deposit accounts; fixed-rate and fixed maturity retail, and non-retail certificates of deposit; and individual retirement accounts. It also provides real estate mortgage loans that are secured by retail, industrial, office, special purpose, and residential single and multi-family properties; real estate construction loans; commercial loans comprising lines of credit for working capital, term loans for capital expenditures, and commercial and stand-by letters of credit; and small business administration loans. In addition, the company offers trade finance services, including commercial and export letters of credit, import lines of credit, documentary collections, international wire transfers, acceptances/trust receipt financing products, export financing, and bills purchase programs. Further, it provides cash management services; and internet, mobile, and tablet banking services. The company operates through full-service branch offices in the California counties of Los Angeles, Orange and San Francisco; Flushing, New York; Houston suburb of Sugar Land, Texas; and a satellite office in Manhattan, New York. The company was incorporated in 1991 and is headquartered in Los Angeles, California.

About Independent Bank Group

Independent Bank Group, Inc., through its subsidiary, Independent Bank provides various commercial banking products and services to businesses, professionals, and individuals in the United States. It accepts various deposit products, including checking and savings accounts, demand deposits, money market accounts, and certificates of deposit. The company also provides commercial real estate loans; commercial construction, land, and land development loans; residential real estate loans; single-family interim construction loans; commercial loans, such as SBA guaranteed loans, business term loans, lines of credit, and energy related loans; agricultural loans for farmers and ranchers; consumer installment loans comprising loans to purchase cars, boats, and other recreational vehicles; and residential mortgages, as well as mortgage warehouse purchase loans. In addition, it offers debit and credit cards, online and mobile banking, estatement, bank-by-mail, and direct deposit services; wealth management services; and business accounts and management services consisting of analyzed business checking, business savings, and treasury management services. The company was incorporated in 2002 and is headquartered in McKinney, Texas.