Comparing Business First Bancshares (NASDAQ:BFST) and Preferred Bank (NASDAQ:PFBC)

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

Volatility & Risk

Preferred Bank has a beta of 1.21, suggesting that its stock price is 21% more volatile than the S&P 500. Comparatively, Business First Bancshares has a beta of 0.12, suggesting that its stock price is 88% less volatile than the S&P 500.

Valuation and Earnings

This table compares Preferred Bank and Business First Bancshares’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Preferred Bank $204.57 million 3.43 $70.99 million $4.55 10.24
Business First Bancshares $83.97 million 3.85 $14.09 million $1.45 16.68

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

Analyst Ratings

This is a summary of current ratings for Preferred Bank and Business First Bancshares, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Preferred Bank 0 2 2 1 2.80
Business First Bancshares 0 0 3 0 3.00

Preferred Bank currently has a consensus price target of $59.25, indicating a potential upside of 27.20%. Business First Bancshares has a consensus price target of $29.00, indicating a potential upside of 19.93%. Given Preferred Bank’s higher possible upside, equities analysts clearly believe Preferred Bank is more favorable than Business First Bancshares.

Dividends

Preferred Bank pays an annual dividend of $1.20 per share and has a dividend yield of 2.6%. Business First Bancshares pays an annual dividend of $0.40 per share and has a dividend yield of 1.7%. Preferred Bank pays out 26.4% of its earnings in the form of a dividend. Business First Bancshares pays out 27.6% 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. Preferred Bank has raised its dividend for 4 consecutive years. Preferred Bank is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional and Insider Ownership

77.5% of Preferred Bank shares are owned by institutional investors. Comparatively, 43.2% of Business First Bancshares shares are owned by institutional investors. 7.4% of Business First Bancshares shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Preferred Bank and Business First Bancshares’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Preferred Bank 33.75% 17.82% 1.76%
Business First Bancshares 18.11% 7.91% 1.00%

Summary

Preferred Bank beats Business First Bancshares on 13 of the 18 factors compared between the two stocks.

Preferred Bank Company Profile

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 in the United States. The company's deposit products include 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 and term loans for capital expenditures; and commercial and export letters of credit, import lines of credit, documentary collections, international wire transfers, export financing products, bills purchase programs, and acceptances/trust receipt financing products, as well as standby letters of credit and foreign exchange services for importers and exporters. In addition, it offers various high-wealth banking services to wealthy individuals residing in the Pacific Rim area with residences, real estate investments, or businesses in Southern California. Further, it provides various banking services to physicians, accountants, attorneys, business managers, and other professionals; and safe deposit boxes, account reconciliation, courier service, and cash management services to the manufacturing, service, and distribution companies. Additionally, it offers remote deposit capture, and Internet and mobile banking services. As of December 31, 2018, it had 13 full-service branch offices in Alhambra, Arcadia, Century City, City of Industry, Diamond Bar, Los Angeles, Pico Rivera, San Francisco, Tarzana, Torrance, and Irvine, California; and Flushing, New York. The company was founded in 1991 and is headquartered in Los Angeles, California.

Business First Bancshares Company Profile

Business First Bancshares, Inc. operates as the bank holding company for Business First Bank that provides various banking products and services. It offers various deposit products and services, including a range of checking, demand, money market, time, and savings accounts, as well as certificates of deposit; and remote deposit capture and direct deposit services. The company also provides commercial and industrial loans, including commercial lines of credit, working capital loans, term loans, equipment financing, asset acquisition, expansion and development loans, borrowing base loans, letters of credit, and other loan products; construction and development loans; commercial real estate loans; residential real estate loans comprising first and second lien one-to-four family mortgage loans, and home equity lines of credit; consumer loans, including secured and unsecured installment and term loans; and credit cards. In addition, it offers wealth management products, including mutual funds, annuities, individual retirement accounts, and other financial products. Further, the company provides a range of other financial services comprising drive-through banking facilities, automated teller machines, and employee and payroll benefits solutions; and night depository, personalized checks, treasury and cash management, merchant, automated clearing house, electronic funds transfer, domestic and foreign wire transfer, traveler's checks, vault, loan and deposit sweep accounts, lock-box, international trade finance, international trade, foreign exchange, online and mobile banking, e-statements, and bank-by-mail services. The company operates through 25 banking centers located in the State of Louisiana and in Dallas, Texas. Business First Bancshares, Inc. was founded in 2006 and is headquartered in Baton Rouge, Louisiana.

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