Prosperity Bancshares (NYSE:PB) versus First Financial Bankshares (FFIN) Financial Analysis

Prosperity Bancshares (NYSE: PB) and First Financial Bankshares (NASDAQ:FFIN) are both mid-cap financials companies, but which is the better stock? We will contrast the two companies based on the strength of their profitability, institutional ownership, valuation, earnings, dividends, analyst recommendations and risk.

Insider and Institutional Ownership

79.5% of Prosperity Bancshares shares are held by institutional investors. Comparatively, 51.9% of First Financial Bankshares shares are held by institutional investors. 4.9% of Prosperity Bancshares shares are held by company insiders. Comparatively, 5.0% of First Financial Bankshares shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Prosperity Bancshares and First Financial Bankshares’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Prosperity Bancshares $793.99 million 6.71 $272.16 million $3.94 19.47
First Financial Bankshares $336.99 million 9.50 $120.37 million $1.81 26.19

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

Dividends

Prosperity Bancshares pays an annual dividend of $1.44 per share and has a dividend yield of 1.9%. First Financial Bankshares pays an annual dividend of $0.76 per share and has a dividend yield of 1.6%. Prosperity Bancshares pays out 36.5% of its earnings in the form of a dividend. First Financial Bankshares pays out 42.0% 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 14 consecutive years. Prosperity Bancshares is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Prosperity Bancshares has a beta of 1.37, suggesting that its share price is 37% more volatile than the S&P 500. Comparatively, First Financial Bankshares has a beta of 1.37, suggesting that its share price is 37% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings for Prosperity Bancshares and First Financial Bankshares, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Prosperity Bancshares 2 7 2 0 2.00
First Financial Bankshares 1 5 0 0 1.83

Prosperity Bancshares presently has a consensus price target of $74.00, indicating a potential downside of 3.55%. First Financial Bankshares has a consensus price target of $42.67, indicating a potential downside of 9.99%. Given Prosperity Bancshares’ stronger consensus rating and higher possible upside, equities analysts clearly believe Prosperity Bancshares is more favorable than First Financial Bankshares.

Profitability

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

Net Margins Return on Equity Return on Assets
Prosperity Bancshares 34.28% 7.28% 1.22%
First Financial Bankshares 35.72% 12.61% 1.60%

Summary

Prosperity Bancshares beats First Financial Bankshares on 10 of the 16 factors compared between the two stocks.

About Prosperity Bancshares

Prosperity Bancshares, Inc. is a financial holding company, which operates through its bank subsidiary, Prosperity Bank (the Bank). The Bank provides a range of financial products and services to small and medium-sized businesses and consumers. The Company, through the Bank, offers a range of loan and deposit products to its customers. At December 31, 2016, the Bank maintained approximately 598,400 separate deposit accounts including certificates of deposit and 53,600 separate loan accounts. It offered commercial real estate (including multifamily residential) and one- to four-family residential loans, as of December 31, 2016. As of December 31, 2016, the Bank operated 245 full service banking locations; 65 in the Houston area; 29 in the South Texas area; 36 in the Dallas/Fort Worth area; 22 in the East Texas area; 29 in the Central Texas area; 34 in the West Texas area; 16 in the Bryan/College Station area, six in the Central Oklahoma area and eight in the Tulsa, Oklahoma area.

About First Financial Bankshares

First Financial Bankshares, Inc. is a financial holding company. The Company, through its subsidiaries, conducts commercial banking business. The Company’s subsidiaries included First Financial Bank, National Association, Abilene, Texas; First Technology Services, Inc., Abilene, Texas; First Financial Trust & Asset Management Company, National Association, Abilene, Texas; First Financial Investments, Inc., Abilene, Texas, First Financial Insurance Agency, Inc., Abilene, Texas, Commercial Bancshares, Inc., and Commercial State Bank, Kingwood, Texas. Its loan portfolio consists of loans made to businesses, professionals, individuals, and farm and ranch operations located in the primary trade areas served by its subsidiary bank. Its securities available-for-sale include the United States Treasury securities, Obligations of the United States Government sponsored enterprises and agencies and Obligations of states and political subdivisions.

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