Critical Comparison: First Horizon (NYSE:FHN) and Prosperity Bancshares (NYSE:PB)

Prosperity Bancshares (NYSE:PB) and First Horizon (NYSE:FHN) are both finance companies, but which is the better stock? We will compare the two companies based on the strength of their risk, valuation, dividends, analyst recommendations, profitability, institutional ownership and earnings.

Dividends

Prosperity Bancshares pays an annual dividend of $2.40 per share and has a dividend yield of 3.3%. First Horizon pays an annual dividend of $0.60 per share and has a dividend yield of 2.4%. Prosperity Bancshares pays out 41.9% of its earnings in the form of a dividend. First Horizon pays out 31.9% 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 raised 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.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Prosperity Bancshares and First Horizon, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Prosperity Bancshares	1	7	7	0	2.40
First Horizon	0	10	9	1	2.55

Prosperity Bancshares presently has a consensus price target of $78.77, indicating a potential upside of 7.10%. First Horizon has a consensus price target of $26.63, indicating a potential upside of 5.58%. Given Prosperity Bancshares’ higher possible upside, research analysts clearly believe Prosperity Bancshares is more favorable than First Horizon.

Valuation and Earnings

This table compares Prosperity Bancshares and First Horizon”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Prosperity Bancshares	$1.74 billion	4.02	$542.84 million	$5.73	12.84
First Horizon	$5.00 billion	2.49	$982.00 million	$1.88	13.42

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

Institutional and Insider Ownership

80.7% of Prosperity Bancshares shares are owned by institutional investors. Comparatively, 80.3% of First Horizon shares are owned by institutional investors. 4.2% of Prosperity Bancshares shares are owned by company insiders. Comparatively, 0.9% of First Horizon shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Prosperity Bancshares	31.22%	7.11%	1.40%
First Horizon	19.67%	11.21%	1.19%

Volatility & Risk

Prosperity Bancshares has a beta of 0.67, meaning that its stock price is 33% less volatile than the S&P 500. Comparatively, First Horizon has a beta of 0.63, meaning that its stock price is 37% less volatile than the S&P 500.

Summary

Prosperity Bancshares beats First Horizon on 10 of the 18 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 First Horizon

First Horizon Corporation operates as the bank holding company for First Horizon Bank that provides various financial services. The company operates through Regional Banking and Specialty Banking segments. It offers general banking services for consumers, businesses, financial institutions, and governments. The company also accepts deposits; provides underwriting services for bank-eligible securities and other fixed-income securities by financial subsidiaries; sells loans and derivatives; financial planning; and offers investment and financial advisory services. In addition, it offers mortgage banking; loan syndications; brokerage services; commercial and business banking for business enterprises, consumer banking, and private client and wealth management services; capital markets, professional commercial real estate, mortgage warehouse and asset-based lending, franchise and equipment finance, tax credit finance, energy and healthcare finance, asset management, and corporate and correspondent banking services. Further, the company provides transaction processing services including check clearing services and remittance processing, credit cards, investment, and sale of mutual fund and retail insurances, as well as trust, fiduciary, and agency services. First Horizon Corporation was founded in 1864 and is headquartered in Memphis, Tennessee.