Critical Contrast: Prosperity Bancshares (NYSE:PB) and MetroCity Bankshares (NASDAQ:MCBS)

Prosperity Bancshares (NYSE:PB) and MetroCity Bankshares (NASDAQ:MCBS) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their dividends, analyst recommendations, risk, institutional ownership, earnings, valuation and profitability.

Risk & Volatility

Prosperity Bancshares has a beta of 0.89, meaning that its stock price is 11% less volatile than the S&P 500. Comparatively, MetroCity Bankshares has a beta of 0.6, meaning that its stock price is 40% less volatile than the S&P 500.

Dividends

Prosperity Bancshares pays an annual dividend of $2.24 per share and has a dividend yield of 2.7%. MetroCity Bankshares pays an annual dividend of $0.92 per share and has a dividend yield of 2.6%. Prosperity Bancshares pays out 47.6% of its earnings in the form of a dividend. MetroCity Bankshares pays out 39.7% 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. Prosperity Bancshares has increased its dividend for 27 consecutive years. Prosperity Bancshares is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Prosperity Bancshares and MetroCity Bankshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Prosperity Bancshares	25.39%	6.46%	1.18%
MetroCity Bankshares	25.54%	15.09%	1.66%

Earnings and Valuation

This table compares Prosperity Bancshares and MetroCity Bankshares”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Prosperity Bancshares	$1.60 billion	4.95	$419.32 million	$4.71	17.62
MetroCity Bankshares	$211.03 million	4.18	$51.61 million	$2.32	15.00

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

Analyst Ratings

This is a summary of recent recommendations for Prosperity Bancshares and MetroCity Bankshares, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Prosperity Bancshares	0	4	9	0	2.69
MetroCity Bankshares	0	1	0	0	2.00

Prosperity Bancshares currently has a consensus target price of $78.96, suggesting a potential downside of 4.85%. MetroCity Bankshares has a consensus target price of $34.00, suggesting a potential downside of 2.33%. Given MetroCity Bankshares’ higher probable upside, analysts plainly believe MetroCity Bankshares is more favorable than Prosperity Bancshares.

Insider and Institutional Ownership

80.7% of Prosperity Bancshares shares are owned by institutional investors. Comparatively, 25.3% of MetroCity Bankshares shares are owned by institutional investors. 4.3% of Prosperity Bancshares shares are owned by insiders. Comparatively, 27.5% of MetroCity Bankshares shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

Prosperity Bancshares beats MetroCity Bankshares on 11 of the 17 factors compared between the two stocks.

About Prosperity Bancshares

Prosperity Bancshares, Inc. operates as bank holding company for the Prosperity Bank that provides financial products and services to businesses and consumers. It accepts various deposit products, such as demand, savings, money market, and time accounts, as well as and certificates of deposit. The company also offers 1-4 family residential mortgage, commercial real estate and multifamily residential, commercial and industrial, agricultural, and non-real estate agricultural loans, as well as construction, land development, and other land loans; consumer loans, including automobile, recreational vehicle, boat, home improvement, personal, and deposit account collateralized loans; term loans and lines of credit; and consumer durables and home equity loans, as well as loans for working capital, business expansion, and purchase of equipment and machinery. In addition, it provides internet banking, mobile banking, trust and wealth management, retail brokerage, mortgage services, and treasury management, as well as debit and credit cards. The company was incorporated in 1983 and is headquartered in Houston, Texas.

About MetroCity Bankshares

MetroCity Bankshares, Inc. operates as the bank holding company for Metro City Bank that engages in the provision of banking products and services in the United States. It offers customary banking services, such as consumer and commercial checking accounts, savings, and money market accounts, as well as certificates of deposit. The company also provides commercial and consumer loans, including single family residential loans; construction and development, and owner and non-owner occupied commercial real estate loans; letters of credit; and commercial and industrial loans, residential mortgage loans, and SBA loans. In addition, it offers online banking services, which include access to account balances, online transfers, online bill payment, and electronic delivery of customer statements; mobile banking solutions, such as remote check deposit with mobile bill pay; and automated teller machines and telephone banking services. Further, it provides debit cards for checking customers, direct deposits, and cashier's checks; treasury management services, including wire transfer, automated clearing house, and stop payments services; and cash management deposit products, such as remote deposit capture, positive pay, zero balance accounts, and sweep accounts. The company was founded in 2006 and is headquartered in Atlanta, Georgia.