Analyzing Home BancShares (HOMB) & Heritage Financial (HFWA)

Home BancShares (NASDAQ: HOMB) and Heritage Financial (NASDAQ:HFWA) are both finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their earnings, profitability, analyst recommendations, valuation, dividends, risk and institutional ownership.

Profitability

This table compares Home BancShares and Heritage Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Home BancShares 28.19% 12.00% 1.70%
Heritage Financial 23.48% 8.42% 1.05%

Analyst Recommendations

This is a summary of current ratings for Home BancShares and Heritage Financial, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Home BancShares 0 4 2 0 2.33
Heritage Financial 0 2 3 0 2.60

Home BancShares presently has a consensus target price of $27.75, suggesting a potential upside of 16.30%. Heritage Financial has a consensus target price of $34.38, suggesting a potential upside of 7.93%. Given Home BancShares’ higher probable upside, equities research analysts clearly believe Home BancShares is more favorable than Heritage Financial.

Earnings & Valuation

This table compares Home BancShares and Heritage Financial’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Home BancShares $523.59 million 7.91 $177.14 million $1.13 21.12
Heritage Financial $170.13 million 5.60 $38.91 million $1.38 23.08

Home BancShares has higher revenue and earnings than Heritage Financial. Home BancShares is trading at a lower price-to-earnings ratio than Heritage Financial, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Home BancShares has a beta of 1.17, indicating that its stock price is 17% more volatile than the S&P 500. Comparatively, Heritage Financial has a beta of 0.47, indicating that its stock price is 53% less volatile than the S&P 500.

Dividends

Home BancShares pays an annual dividend of $0.44 per share and has a dividend yield of 1.8%. Heritage Financial pays an annual dividend of $0.52 per share and has a dividend yield of 1.6%. Home BancShares pays out 38.9% of its earnings in the form of a dividend. Heritage Financial pays out 37.7% 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.

Insider & Institutional Ownership

63.5% of Home BancShares shares are held by institutional investors. Comparatively, 78.1% of Heritage Financial shares are held by institutional investors. 11.3% of Home BancShares shares are held by insiders. Comparatively, 2.7% of Heritage Financial shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Summary

Home BancShares beats Heritage Financial on 10 of the 16 factors compared between the two stocks.

About Home BancShares

Home BancShares, Inc. is a bank holding company. The Company is engaged in providing a range of commercial and retail banking, and related financial services to businesses, real estate developers and investors, individuals and municipalities through its community bank subsidiary, Centennial Bank (the Bank). It operates through community banking segment. It offers a range of products and services, including Internet banking, mobile banking and voice response information, cash management, overdraft protection, direct deposit, safe deposit boxes, the United States savings bonds and automatic account transfers. The Bank has locations in Arkansas, Florida, South Alabama and New York City. As of September 26, 2017, the Company conducted business principally through 76 branches in Arkansas, 89 branches in Florida, six branches in Alabama and one branch in New York City. It originates loans secured by single and multi-family real estate, residential construction and commercial buildings.

About Heritage Financial

Heritage Financial Corporation is a bank holding company. The Company is engaged in the business of planning, directing and coordinating the business activities of its bank subsidiary, Heritage Bank (the Bank). The Bank’s lending activities focus on commercial business lending. The Bank also originates consumer loans, real estate construction and land development loans, and one- to four-family residential loans. The Bank’s investment securities available for sale include the United States treasury and the United States Government-sponsored agencies; municipal securities; mortgage-backed securities and collateralized mortgage obligations, which include residential and commercial; collateralized loan obligations; corporate obligations, and other securities. The Bank’s primary sources of funds are deposits and loan repayments. Borrowings are used on a short-term basis to compensate for reductions in other sources of funds, such as deposit inflows.

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