First Commonwealth Financial (NYSE:FCF) and Prosperity Bancshares (NYSE:PB) Critical Comparison

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

Dividends

Prosperity Bancshares pays an annual dividend of $2.40 per share and has a dividend yield of 3.3%. First Commonwealth Financial pays an annual dividend of $0.56 per share and has a dividend yield of 2.6%. Prosperity Bancshares pays out 43.6% of its earnings in the form of a dividend. First Commonwealth Financial pays out 33.1% 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 and First Commonwealth Financial has raised its dividend for 9 consecutive years. Prosperity Bancshares is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Prosperity Bancshares has a beta of 0.64, indicating that its stock price is 36% less volatile than the S&P 500. Comparatively, First Commonwealth Financial has a beta of 0.72, indicating that its stock price is 28% less volatile than the S&P 500.

Insider & Institutional Ownership

80.7% of Prosperity Bancshares shares are owned by institutional investors. Comparatively, 72.6% of First Commonwealth Financial shares are owned by institutional investors. 4.0% of Prosperity Bancshares shares are owned by insiders. Comparatively, 1.9% of First Commonwealth Financial shares are owned 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.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Prosperity Bancshares	26.99%	7.68%	1.45%
First Commonwealth Financial	23.06%	11.17%	1.40%

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Prosperity Bancshares and First Commonwealth Financial, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Prosperity Bancshares	2	6	7	1	2.44
First Commonwealth Financial	0	2	4	0	2.67

Prosperity Bancshares presently has a consensus price target of $78.36, suggesting a potential upside of 7.50%. First Commonwealth Financial has a consensus price target of $24.00, suggesting a potential upside of 13.45%. Given First Commonwealth Financial’s stronger consensus rating and higher probable upside, analysts plainly believe First Commonwealth Financial is more favorable than Prosperity Bancshares.

Earnings and Valuation

This table compares Prosperity Bancshares and First Commonwealth Financial”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Prosperity Bancshares	$1.74 billion	4.23	$542.84 million	$5.50	13.25
First Commonwealth Financial	$729.51 million	2.93	$152.30 million	$1.69	12.52

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

Summary

Prosperity Bancshares beats First Commonwealth Financial on 12 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 Commonwealth Financial

First Commonwealth Financial Corporation, a financial holding company, provides various consumer and commercial banking services in the United States. Its consumer services include personal checking accounts, interest-earning checking accounts, savings and health savings accounts, insured money market accounts, debit cards, investment certificates, fixed and variable rate certificates of deposit, mortgage loans, secured and unsecured installment loans, construction and real estate loans, safe deposit facilities, credit cards, credit lines with overdraft checking protection, IRA accounts, and automated teller machine (atm) services, as well as internet, mobile, and telephone banking services. The company's commercial banking services comprise commercial lending, business checking accounts, online account management services, payroll direct deposits, commercial cash management services, and repurchase agreements, as well as ACH origination services. In addition, it offers various trust and asset management services; auto, home, and business insurance, as well as term life insurance; and annuities, mutual funds, and stock and bond brokerage services through a broker-dealer and insurance brokers. The company was founded in 1934 and is headquartered in Indiana, Pennsylvania.