Critical Review: Cullen/Frost Bankers (NYSE:CFR) vs. Red River Bancshares (NASDAQ:RRBI)

Red River Bancshares (NASDAQ:RRBI) and Cullen/Frost Bankers (NYSE:CFR) are both finance companies, but which is the better stock? We will compare the two businesses based on the strength of their valuation, risk, institutional ownership, analyst recommendations, earnings, profitability and dividends.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Red River Bancshares and Cullen/Frost Bankers, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Red River Bancshares	0	0	2	1	3.33
Cullen/Frost Bankers	3	6	4	0	2.08

Red River Bancshares presently has a consensus price target of $67.00, suggesting a potential downside of 26.20%. Cullen/Frost Bankers has a consensus price target of $142.67, suggesting a potential upside of 5.86%. Given Cullen/Frost Bankers’ higher probable upside, analysts plainly believe Cullen/Frost Bankers is more favorable than Red River Bancshares.

Volatility & Risk

Red River Bancshares has a beta of 0.48, indicating that its share price is 52% less volatile than the S&P 500. Comparatively, Cullen/Frost Bankers has a beta of 0.63, indicating that its share price is 37% less volatile than the S&P 500.

Dividends

Red River Bancshares pays an annual dividend of $1.00 per share and has a dividend yield of 1.1%. Cullen/Frost Bankers pays an annual dividend of $4.00 per share and has a dividend yield of 3.0%. Red River Bancshares pays out 15.6% of its earnings in the form of a dividend. Cullen/Frost Bankers pays out 40.3% 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. Red River Bancshares has raised its dividend for 3 consecutive years and Cullen/Frost Bankers has raised its dividend for 32 consecutive years. Cullen/Frost Bankers is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares Red River Bancshares and Cullen/Frost Bankers”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Red River Bancshares	$169.85 million	3.52	$42.76 million	$6.39	14.21
Cullen/Frost Bankers	$2.92 billion	2.91	$648.56 million	$9.92	13.59

Cullen/Frost Bankers has higher revenue and earnings than Red River Bancshares. Cullen/Frost Bankers is trading at a lower price-to-earnings ratio than Red River Bancshares, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

27.6% of Red River Bancshares shares are held by institutional investors. Comparatively, 86.9% of Cullen/Frost Bankers shares are held by institutional investors. 16.6% of Red River Bancshares shares are held by insiders. Comparatively, 1.2% of Cullen/Frost Bankers shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares Red River Bancshares and Cullen/Frost Bankers’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Red River Bancshares	25.18%	12.35%	1.32%
Cullen/Frost Bankers	22.21%	15.49%	1.24%

Summary

Cullen/Frost Bankers beats Red River Bancshares on 10 of the 18 factors compared between the two stocks.

About Red River Bancshares

Red River Bancshares, Inc. operates as a bank holding company for Red River Bank that provides banking products and services to commercial and retail customers in Louisiana. The company provides various deposit products, including checking, saving, money market accounts, and time deposits. It offers commercial real estate loans; one-to-four family mortgage loans and home equity lines of credit; construction and development loans; commercial and industrial loans; small business administration paycheck protection program loans; tax-exempt loans; consumer loans to individuals for personal, family, and household purposes, including secured and unsecured installment and term loans; home mortgage loans; and lines of credit and standby letters of credit. In addition, the company provides treasury management, private banking, and brokerage; investment advisory, financial planning, and a suite of retirement plans; debit and credit cards, direct deposits, cashier's checks, and wire transfer services; online banking services, including access to account balances, online transfers, online bill payment, and electronic delivery of customer statements; and banking services in person, through ATMs, drive-through facilities, night deposits, telephone, mail, mobile banking, and remote deposits. Red River Bancshares, Inc. was incorporated in 1998 and is headquartered in Alexandria, Louisiana.

About Cullen/Frost Bankers

Cullen/Frost Bankers, Inc. operates as the bank holding company for Frost Bank that provides commercial and consumer banking services in Texas. The company offers commercial banking services to corporations, including financing for industrial and commercial properties, interim construction related to industrial and commercial properties, equipment, inventories and accounts receivables, and acquisitions; and treasury management services, as well as originates commercial leasing services. It also provides consumer banking services, such as checking accounts, savings programs, automated-teller machines (ATMs), overdraft facilities, installment and real estate loans, first mortgage loans, home equity loans and lines of credit, drive-in and night deposit services, safe deposit facilities, and brokerage services. In addition, the company offers international banking services comprising deposits, loans, letters of credit, foreign collections, funds transmitting, and foreign exchange services; correspondent banking activities, including check clearing, transfer of funds, fixed income security services, and securities custody and clearance services. Further, it offers trust, investment, agency, and custodial services for individual and corporate clients; capital market services that include sales and trading, new issue underwriting, money market trading, advisory, and securities safekeeping and clearance; and support for international business activities, including foreign exchange, letters of credit, export-import financing, and other related activities. Additionally, the company offers insurance and securities brokerage services; holding of securities for investment purposes; and investment management services for mutual funds, institutions, and individuals. It serves energy, manufacturing, services, construction, retail, telecommunications, healthcare, military, and transportation industries. The company was founded in 1868 and is headquartered in San Antonio, Texas.