Contrasting Citizens (NASDAQ:CIZN) and Preferred Bank (NASDAQ:PFBC)

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

Valuation and Earnings

This table compares Preferred Bank and Citizens”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Preferred Bank	$522.66 million	2.54	$130.66 million	$9.63	9.57
Citizens	$78.48 million	0.70	$5.49 million	$0.98	9.90

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

Volatility & Risk

Preferred Bank has a beta of 0.97, meaning that its stock price is 3% less volatile than the S&P 500. Comparatively, Citizens has a beta of -0.02, meaning that its stock price is 102% less volatile than the S&P 500.

Profitability

This table compares Preferred Bank and Citizens’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Preferred Bank	25.00%	17.80%	1.91%
Citizens	7.00%	11.28%	0.37%

Dividends

Preferred Bank pays an annual dividend of $3.00 per share and has a dividend yield of 3.3%. Citizens pays an annual dividend of $0.64 per share and has a dividend yield of 6.6%. Preferred Bank pays out 31.2% of its earnings in the form of a dividend. Citizens pays out 65.3% 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.

Institutional and Insider Ownership

72.8% of Preferred Bank shares are owned by institutional investors. Comparatively, 9.7% of Citizens shares are owned by institutional investors. 8.9% of Citizens shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Preferred Bank and Citizens, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Preferred Bank	0	2	1	0	2.33
Citizens	0	0	0	0	0.00

Preferred Bank currently has a consensus price target of $104.00, suggesting a potential upside of 12.90%. Given Preferred Bank’s stronger consensus rating and higher possible upside, research analysts clearly believe Preferred Bank is more favorable than Citizens.

Summary

Preferred Bank beats Citizens on 13 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 Citizens

Citizens Holding Company operates as the bank holding company for The Citizens Bank of Philadelphia that provides various commercial and personal banking products and services. It offers demand deposits; and savings and time deposit accounts. The company also provides secured and unsecured loans; mortgage loans; single and multi-family housing, farm, residential and commercial construction, and commercial real estate loans; commercial, industrial, and agricultural production loans; and consumer loans, as well as issues letters of credit. In addition, it offers personal and corporate trust services; credit life and title insurance; and online and mobile banking services. The company was founded in 1908 and is headquartered in Philadelphia, Mississippi.