Comparing Pathward Financial (NASDAQ:CASH) and Preferred Bank (NASDAQ:PFBC)

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

Volatility and Risk

Preferred Bank has a beta of 0.54, meaning that its stock price is 46% less volatile than the S&P 500. Comparatively, Pathward Financial has a beta of 0.6, meaning that its stock price is 40% less volatile than the S&P 500.

Dividends

Preferred Bank pays an annual dividend of $3.20 per share and has a dividend yield of 3.1%. Pathward Financial pays an annual dividend of $0.20 per share and has a dividend yield of 0.3%. Preferred Bank pays out 29.3% of its earnings in the form of a dividend. Pathward Financial pays out 2.5% 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. Preferred Bank has raised 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.

Valuation and Earnings

This table compares Preferred Bank and Pathward Financial”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Preferred Bank	$505.97 million	2.94	$133.63 million	$10.94	9.41
Pathward Financial	$851.49 million	1.92	$185.87 million	$7.98	9.85

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

Analyst Ratings

This is a summary of current recommendations for Preferred Bank and Pathward Financial, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Preferred Bank	0	5	2	0	2.29
Pathward Financial	0	0	3	0	3.00

Preferred Bank presently has a consensus price target of $106.25, suggesting a potential upside of 3.18%. Pathward Financial has a consensus price target of $101.00, suggesting a potential upside of 28.47%. Given Pathward Financial’s stronger consensus rating and higher possible upside, analysts clearly believe Pathward Financial is more favorable than Preferred Bank.

Institutional and Insider Ownership

72.8% of Preferred Bank shares are owned by institutional investors. Comparatively, 92.7% of Pathward Financial shares are owned by institutional investors. 1.4% of Pathward Financial shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Preferred Bank	26.54%	17.27%	1.77%
Pathward Financial	21.03%	20.61%	2.41%

Summary

Pathward Financial beats Preferred Bank on 12 of the 17 factors compared between the two stocks.

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.

About Pathward Financial

Pathward Financial, Inc. operates as the bank holding company for Pathward, National Association that provides various banking products and services in the United States. The company operates through three segments: Consumer, Commercial, and Corporate Services/Other. It offers demand deposit accounts, savings accounts, and money market savings accounts. The company also provides commercial finance product comprising term lending, asset-based lending, factoring, lease financing, insurance premium finance, government guaranteed lending, and other commercial finance products; consumer credit products; other consumer financing services; tax services, which includes short-term refund advance loans and short-term electronic return originator advance loans; and warehouse financing services. In addition, it issues prepaid cards; and offers payment solutions, such as acceptance, processing, and settlement of credit card and debit card payments. The company was formerly known as Meta Financial Group, Inc. and changed its name to Pathward Financial, Inc. in July 2022. Pathward Financial, Inc. was founded in 1954 and is based in Sioux Falls, South Dakota.