United Community Financial Corp. (NASDAQ: UCFC) and First Financial Northwest (NASDAQ:FFNW) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their profitability, institutional ownership, analyst recommendations, risk, valuation, earnings and dividends.

Risk and Volatility

United Community Financial Corp. has a beta of 0.57, suggesting that its stock price is 43% less volatile than the S&P 500. Comparatively, First Financial Northwest has a beta of 0.33, suggesting that its stock price is 67% less volatile than the S&P 500.

Dividends

United Community Financial Corp. pays an annual dividend of $0.16 per share and has a dividend yield of 1.8%. First Financial Northwest pays an annual dividend of $0.28 per share and has a dividend yield of 1.7%. United Community Financial Corp. pays out 39.0% of its earnings in the form of a dividend. First Financial Northwest pays out 30.8% 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.

Profitability

This table compares United Community Financial Corp. and First Financial Northwest’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
United Community Financial Corp. 18.95% 8.90% 1.00%
First Financial Northwest 20.79% 6.85% 0.93%

Institutional & Insider Ownership

58.2% of United Community Financial Corp. shares are held by institutional investors. Comparatively, 44.4% of First Financial Northwest shares are held by institutional investors. 3.6% of United Community Financial Corp. shares are held by company insiders. Comparatively, 7.3% of First Financial Northwest shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Valuation & Earnings

This table compares United Community Financial Corp. and First Financial Northwest’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
United Community Financial Corp. $91.26 million 4.96 $20.39 million $0.41 22.20
First Financial Northwest $37.73 million 4.40 $9.43 million $0.91 17.59

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

Analyst Ratings

This is a breakdown of current ratings and recommmendations for United Community Financial Corp. and First Financial Northwest, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
United Community Financial Corp. 1 0 2 0 2.33
First Financial Northwest 0 1 0 0 2.00

United Community Financial Corp. presently has a consensus target price of $10.50, indicating a potential upside of 15.38%. Given United Community Financial Corp.’s stronger consensus rating and higher probable upside, analysts clearly believe United Community Financial Corp. is more favorable than First Financial Northwest.

Summary

United Community Financial Corp. beats First Financial Northwest on 12 of the 16 factors compared between the two stocks.

United Community Financial Corp. Company Profile

United Community Financial Corp. is financial services holding company. The Company’s subsidiaries include The Home Savings and Loan Company of Youngstown, Ohio (Home Savings or the Bank), HSB Insurance, LLC and HSB Capital, LLC. The principal business of Home Savings is the origination of mortgage loans, including construction loans, on residential and nonresidential real estate located in Home Savings’ primary market area. In addition to real estate lending, Home Savings originates commercial loans and various types of consumer loans. Funds for lending and other investment activities are obtained primarily from retail deposits. HSB Insurance, LLC is an insurance agency that offers a range of insurance products for business and residential customers, which include, auto, homeowners, life-health, commercial, surety bonds and aviation. HSB Capital, LLC provides mezzanine funding for customers. Mezzanine loans are offered to customers in United Community’s market area.

First Financial Northwest Company Profile

First Financial Northwest, Inc. (First Financial Northwest) is a holding company for First Financial Northwest Bank (the Bank). The Bank primarily serves the greater Puget Sound region of King and to a lesser extent, Pierce, Snohomish and Kitsap Counties, Washington through its full-service banking office located in Renton, Washington and branch office in Mill Creek, Washington. The Bank’s business consists of attracting deposits from the public and utilizing these funds to originate one- to four-family residential, multifamily, commercial real estate, construction/land development, business and consumer loans. It focuses on its lending activities primarily on loans secured by commercial real estate, construction/land development, first mortgages on one- to four-family residences, multifamily and business lending. Its investment portfolio consisted principally of mortgage-backed securities, municipal bonds, the United States Government Agency obligations and corporate bonds.

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