Financial Comparison: Heritage Financial (HFWA) & United Community Financial (UCFC)

Heritage Financial (NASDAQ: HFWA) and United Community Financial (NASDAQ:UCFC) are both small-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, earnings, dividends, institutional ownership, analyst recommendations, risk and profitability.

Earnings and Valuation

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This table compares Heritage Financial and United Community Financial’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Heritage Financial $183.29 million 5.56 $41.79 million $1.48 20.24
United Community Financial $118.75 million 4.16 $21.78 million $0.57 17.37

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

Profitability

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

Net Margins Return on Equity Return on Assets
Heritage Financial 21.16% 8.86% 1.11%
United Community Financial 18.34% 9.91% 1.10%

Dividends

Heritage Financial pays an annual dividend of $0.60 per share and has a dividend yield of 2.0%. United Community Financial pays an annual dividend of $0.24 per share and has a dividend yield of 2.4%. Heritage Financial pays out 40.5% of its earnings in the form of a dividend. United Community Financial pays out 42.1% 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

70.9% of Heritage Financial shares are owned by institutional investors. Comparatively, 59.2% of United Community Financial shares are owned by institutional investors. 2.7% of Heritage Financial shares are owned by insiders. Comparatively, 4.2% of United Community Financial shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Volatility & Risk

Heritage Financial has a beta of 0.49, indicating that its stock price is 51% less volatile than the S&P 500. Comparatively, United Community Financial has a beta of 0.42, indicating that its stock price is 58% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and target prices for Heritage Financial and United Community Financial, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Heritage Financial 0 1 4 0 2.80
United Community Financial 0 1 1 0 2.50

Heritage Financial currently has a consensus target price of $34.50, suggesting a potential upside of 15.19%. United Community Financial has a consensus target price of $10.50, suggesting a potential upside of 6.06%. Given Heritage Financial’s stronger consensus rating and higher possible upside, equities analysts clearly believe Heritage Financial is more favorable than United Community Financial.

Summary

Heritage Financial beats United Community Financial on 13 of the 16 factors compared between the two stocks.

About Heritage Financial

Heritage Financial Corporation operates as the bank holding company for Heritage Bank that provides various financial services to businesses and individuals in the United States. The company accepts various deposit products, such as noninterest demand accounts, interest bearing demand deposits, money market accounts, savings accounts, personal checking accounts, and certificates of deposit. Its loan portfolio includes commercial and industrial loans, owner-occupied and non-owner occupied commercial real estate loans, one-to-four family residential loans, real estate construction and land development loans, consumer loans, business lines of credit, term equipment financing, and term real estate loans, as well as commercial loans focuses on real estate related industries and businesses in agricultural, healthcare, legal, and other professions. The company also originates loans that are guaranteed by the U.S. Small Business Administration; and offers trust services through trust powers, as well as objective advice. As of December 31, 2017, the company had a network of 59 branches located in Washington and Oregon. The company was formerly known as Heritage Financial Corporation, M.H.C. and changed its name to Heritage Financial Corporation in 1998. Heritage Financial Corporation was founded in 1994 and is headquartered in Olympia, Washington.

About United Community Financial

United Community Financial Corp. operates as the holding company for The Home Savings and Loan Company of Youngstown that provides consumer and business banking services. The company offers various deposit instruments, including checking accounts, regular savings accounts, money market accounts, individual retirement accounts, and certificates of deposit. It provides commercial loans, such as multifamily loans; nonresidential real estate loans comprising retail centers, office buildings, and industrial buildings; land loans; loans for the construction of multifamily properties, nonresidential real estate projects, and to builders; and secured and unsecured loans, including traditional lines of credit, revolving lines of credit, and term loans. The company also offers residential mortgage loans consisting of one-to four-family loans; loans for the construction of one-to four-family residences; and consumer loans, such as home equity loans, home equity lines of credit, recreational vehicle loans, unsecured loans, and cash-secured loans. In addition, it provides insurance products for business and residential customers, including auto, homeowners, life-health, commercial, surety bonds, and aviation. The company offers services through its main office located in Youngstown, Ohio; and 35 retail banking offices, 3 wealth management offices, and 13 residential mortgage loan centers located in Ohio, Western Pennsylvania, and West Virginia.United Community Financial Corp. was founded in 1889 and is based in Youngstown, Ohio.

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