Analyzing C&F Financial (NASDAQ:CFFI) & Preferred Bank (NASDAQ:PFBC)

C&F Financial (NASDAQ:CFFI) and Preferred Bank (NASDAQ:PFBC) are both small-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their dividends, valuation, risk, profitability, analyst recommendations, earnings and institutional ownership.

Valuation & Earnings

This table compares C&F Financial and Preferred Bank”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
C&F Financial	$186.13 million	1.76	$26.83 million	$8.96	11.24
Preferred Bank	$286.37 million	5.25	$133.63 million	$10.94	9.53

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

Analyst Ratings

This is a breakdown of current ratings and recommmendations for C&F Financial and Preferred Bank, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
C&F Financial	0	1	2	0	2.67
Preferred Bank	0	5	2	1	2.50

C&F Financial currently has a consensus price target of $115.00, indicating a potential upside of 14.16%. Preferred Bank has a consensus price target of $108.50, indicating a potential upside of 4.11%. Given C&F Financial’s stronger consensus rating and higher possible upside, equities research analysts plainly believe C&F Financial is more favorable than Preferred Bank.

Dividends

C&F Financial pays an annual dividend of $1.92 per share and has a dividend yield of 1.9%. Preferred Bank pays an annual dividend of $3.20 per share and has a dividend yield of 3.1%. C&F Financial pays out 21.4% of its earnings in the form of a dividend. Preferred Bank pays out 29.3% 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. C&F Financial has increased its dividend for 1 consecutive years and Preferred Bank has increased its dividend for 5 consecutive years. Preferred Bank is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares C&F Financial and Preferred Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
C&F Financial	14.91%	10.72%	1.02%
Preferred Bank	26.54%	17.27%	1.77%

Insider and Institutional Ownership

37.2% of C&F Financial shares are owned by institutional investors. Comparatively, 72.8% of Preferred Bank shares are owned by institutional investors. 6.4% of C&F Financial shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Risk and Volatility

C&F Financial has a beta of 0.32, suggesting that its stock price is 68% less volatile than the S&P 500. Comparatively, Preferred Bank has a beta of 0.57, suggesting that its stock price is 43% less volatile than the S&P 500.

Summary

Preferred Bank beats C&F Financial on 12 of the 17 factors compared between the two stocks.

About C&F Financial

C&F Financial Corp. is a bank holding company, which engages in the provision of banking services to individuals and businesses. It operates through the following segments: Community Banking, Mortgage Banking and Consumer Finance. The Community Banking segment provides checking and savings deposit accounts, business, real estate, development, mortgage, home equity, and installment loans. The Mortgage Banking segment offers ancillary mortgage loan origination services for loan settlement and residential appraisals. The Consumer Finance segment consists of automobile financing through lending programs that are designed to serve customers in the non-prime market who have limited access to traditional automobile financing. The company was founded on March 8, 1994 and is headquartered in Toano, VA.

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.