United Community Banks (NASDAQ:UCBI) and 1st Source (NASDAQ:SRCE) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, earnings, dividends, profitability, risk, valuation and analyst recommendations.

Analyst Recommendations

This is a breakdown of current recommendations for United Community Banks and 1st Source, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
United Community Banks 0 4 2 0 2.33
1st Source 0 0 0 0 N/A

United Community Banks presently has a consensus price target of $30.00, suggesting a potential upside of 9.73%. Given United Community Banks’ higher possible upside, equities research analysts plainly believe United Community Banks is more favorable than 1st Source.

Volatility and Risk

United Community Banks has a beta of 1.25, indicating that its share price is 25% more volatile than the S&P 500. Comparatively, 1st Source has a beta of 1.12, indicating that its share price is 12% more volatile than the S&P 500.

Profitability

This table compares United Community Banks and 1st Source’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
United Community Banks 27.98% 12.33% 1.42%
1st Source 23.46% 11.27% 1.35%

Dividends

United Community Banks pays an annual dividend of $0.64 per share and has a dividend yield of 2.3%. 1st Source pays an annual dividend of $1.08 per share and has a dividend yield of 2.3%. United Community Banks pays out 29.9% of its earnings in the form of a dividend. 1st Source pays out 34.2% 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. United Community Banks has raised its dividend for 3 consecutive years and 1st Source has raised its dividend for 33 consecutive years. United Community Banks is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares United Community Banks and 1st Source’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
United Community Banks $593.04 million 3.65 $166.11 million $2.14 12.78
1st Source $354.37 million 3.35 $82.41 million $3.16 14.64

United Community Banks has higher revenue and earnings than 1st Source. United Community Banks is trading at a lower price-to-earnings ratio than 1st Source, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

90.5% of United Community Banks shares are held by institutional investors. Comparatively, 71.2% of 1st Source shares are held by institutional investors. 1.2% of United Community Banks shares are held by insiders. Comparatively, 20.0% of 1st Source shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Summary

United Community Banks beats 1st Source on 12 of the 16 factors compared between the two stocks.

About United Community Banks

United Community Banks, Inc. operates as the bank holding company for United Community Bank that provides retail and corporate banking services to individuals and businesses. It offers various deposit accounts, such as checking accounts, savings and time deposits accounts, NOW accounts, money market deposits, and certificates of deposit. The company also provides secured and unsecured loans that include commercial real estate, commercial and industrial, commercial construction, residential construction and mortgage, and indirect auto loans, as well as home equity lines of credits and fixed and adjustable-rate home mortgage loans. It also offers wire transfers, brokerage services, and other financial services, as well as risk management, payment processing, and merchant services. In addition, the company owns an insurance agency. As of December 31, 2017, it operated 156 locations in Georgia, North Carolina, South Carolina, and Tennessee. United Community Banks, Inc. was founded in 1950 and is based in Blairsville, Georgia.

About 1st Source

1st Source Corporation operates as the holding company for 1st Source Bank that provides commercial and consumer banking services, trust and investment management services, and insurance to individual and business clients. Its consumer banking services include checking and savings accounts; certificates of deposit; individual retirement accounts; online and mobile banking products; consumer loans, real estate loans, and lines of credit; and financial planning, financial literacy, and other consultative services, as well as debit and credit cards. The company also offers commercial, small business, agricultural, and real estate loans for general corporate purposes, including financing for industrial and commercial properties, equipment, inventories, accounts receivables, and renewable energy and acquisition financing; and commercial leasing, treasury management, and retirement planning services. In addition, it provides a range of trust, investment, agency, and custodial services comprising administration of estates and personal trusts, as well as management of investment accounts for individuals, employee benefit plans, and charitable foundations. Further, the company offers equipment loan and lease products for new and used aircraft, automobiles and light trucks, construction equipment, and medium and heavy duty trucks; and leases construction equipment, various types of trucks, vans, automobiles, motor coaches, shuttle buses, and other equipment. Additionally, it provides corporate and personal property, casualty, and individual and group health and life insurance products and services; and investment advisory services to trust and investment clients. As of December 31, 2018, the company operated through 80 banking centers in 17 counties in Indiana and Michigan, and Sarasota County in Florida. 1st Source Corporation was founded in 1863 and is headquartered in South Bend, Indiana.

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