Analyzing Preferred Bank (NASDAQ:PFBC) and Eagle Bancorp Montana (NASDAQ:EBMT)

Preferred Bank (NASDAQ:PFBC) and Eagle Bancorp Montana (NASDAQ:EBMT) are both small-cap finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their profitability, institutional ownership, earnings, risk, dividends, valuation and analyst recommendations.

Profitability

This table compares Preferred Bank and Eagle Bancorp Montana’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%
Eagle Bancorp Montana	7.03%	4.96%	0.41%

Insider and Institutional Ownership

72.8% of Preferred Bank shares are owned by institutional investors. Comparatively, 35.7% of Eagle Bancorp Montana shares are owned by institutional investors. 6.7% of Eagle Bancorp Montana shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Dividends

Preferred Bank pays an annual dividend of $2.80 per share and has a dividend yield of 3.0%. Eagle Bancorp Montana pays an annual dividend of $0.57 per share and has a dividend yield of 3.3%. Preferred Bank pays out 28.1% of its earnings in the form of a dividend. Eagle Bancorp Montana pays out 52.8% 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. Eagle Bancorp Montana has increased its dividend for 14 consecutive years. Eagle Bancorp Montana is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

This table compares Preferred Bank and Eagle Bancorp Montana”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Preferred Bank	$485.10 million	2.81	$150.04 million	$9.98	9.45
Eagle Bancorp Montana	$114.34 million	1.22	$10.06 million	$1.08	16.11

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

Analyst Recommendations

This is a summary of recent recommendations for Preferred Bank and Eagle Bancorp Montana, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Preferred Bank	0	0	2	0	3.00
Eagle Bancorp Montana	0	1	0	0	2.00

Preferred Bank currently has a consensus price target of $99.50, indicating a potential upside of 5.48%. Eagle Bancorp Montana has a consensus price target of $13.50, indicating a potential downside of 22.41%. Given Preferred Bank’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Preferred Bank is more favorable than Eagle Bancorp Montana.

Volatility and Risk

Preferred Bank has a beta of 0.94, indicating that its stock price is 6% less volatile than the S&P 500. Comparatively, Eagle Bancorp Montana has a beta of 0.52, indicating that its stock price is 48% less volatile than the S&P 500.

Summary

Preferred Bank beats Eagle Bancorp Montana on 13 of the 17 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 Eagle Bancorp Montana

Eagle Bancorp Montana, Inc. operates as the bank holding company for Opportunity Bank of Montana that provides various retail banking products and services to small businesses and individuals in Montana. It accepts various deposit products, such as checking, savings, money market, and individual retirement accounts, as well as certificates of deposit accounts. The company also provides 1-4 family residential mortgage loans, such as residential mortgages and construction of residential properties; commercial real estate loans, including multi-family dwellings, nonresidential property, commercial construction and development, and farmland loans; and second mortgage/home equity loans. In addition, it offers consumer loans, such as loans secured by collateral other than real estate, such as automobiles, recreational vehicles, and boats; personal loans and lines of credit; commercial business loans consisting of business loans and lines of credit on a secured and unsecured basis; construction loans; agricultural loans; and mortgage loan services. The company operates full-service branches and automated teller machines. Eagle Bancorp Montana, Inc. was founded in 1922 and is headquartered in Helena, Montana.