Old Second Bancorp (NASDAQ:OSBC) and First Business Financial Services (NASDAQ:FBIZ) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, valuation, risk, dividends, profitability and analyst recommendations.

Valuation & Earnings

This table compares Old Second Bancorp and First Business Financial Services’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Old Second Bancorp $117.88 million 3.89 $15.13 million $0.81 19.01
First Business Financial Services $92.48 million 2.19 $11.90 million $1.35 17.16

Old Second Bancorp has higher revenue and earnings than First Business Financial Services. First Business Financial Services is trading at a lower price-to-earnings ratio than Old Second Bancorp, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Old Second Bancorp and First Business Financial Services’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Old Second Bancorp 16.58% 14.42% 1.20%
First Business Financial Services 13.86% 7.94% 0.73%

Institutional & Insider Ownership

69.9% of Old Second Bancorp shares are owned by institutional investors. Comparatively, 62.7% of First Business Financial Services shares are owned by institutional investors. 3.3% of Old Second Bancorp shares are owned by insiders. Comparatively, 6.2% of First Business Financial Services shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Dividends

Old Second Bancorp pays an annual dividend of $0.04 per share and has a dividend yield of 0.3%. First Business Financial Services pays an annual dividend of $0.56 per share and has a dividend yield of 2.4%. Old Second Bancorp pays out 4.9% of its earnings in the form of a dividend. First Business Financial Services pays out 41.5% 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.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Old Second Bancorp and First Business Financial Services, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Old Second Bancorp 0 0 2 0 3.00
First Business Financial Services 0 1 2 0 2.67

Old Second Bancorp presently has a consensus price target of $14.75, suggesting a potential downside of 4.22%. First Business Financial Services has a consensus price target of $26.67, suggesting a potential upside of 15.14%. Given First Business Financial Services’ higher probable upside, analysts clearly believe First Business Financial Services is more favorable than Old Second Bancorp.

Risk & Volatility

Old Second Bancorp has a beta of 0.62, indicating that its share price is 38% less volatile than the S&P 500. Comparatively, First Business Financial Services has a beta of 0.76, indicating that its share price is 24% less volatile than the S&P 500.

Summary

Old Second Bancorp beats First Business Financial Services on 10 of the 15 factors compared between the two stocks.

Old Second Bancorp Company Profile

Old Second Bancorp, Inc. operates as a bank holding company for Old Second National Bank that provides a range of banking services. The company accepts demand, NOW, money market, savings, time deposit, individual retirement, and checking accounts, as well as certificate of deposit accounts. It also offers revolving lines of credit for working capital; lending for capital expenditures on manufacturing equipment; lending to small business manufactures, service companies, medical and dental entities, and specialty contractors; commercial real estate loans; construction loans; residential real estate loans, such as residential first mortgage loans, second mortgage loans, and home equity line of credit mortgages; consumer loans, including motor vehicle, home improvement, and signature loans; installment and agricultural loans, as well as student loans; and overdraft checking. In addition, the company provides safe deposit services; trust services; wealth management services; and money orders, cashier's checks, foreign currency, direct deposits, discount brokerage, debit and credit cards, and other services, as well as acquires the U.S. treasury notes and bonds. Further, it offers online and mobile banking; corporate cash management products, including remote and mobile deposits capture, investment sweep accounts, zero balance accounts, automated tax payments, automatic teller machines access, telephone banking, lockbox accounts, automated clearing house transactions, account reconciliation, controlled disbursement, detail and general information reporting, wire transfers, and vault services for currency and coin; and investment, agency, and custodial services for individual, corporate, and not-for-profit clients. The company provides its financial services through its 25 banking locations located in Kane, Kendall, DeKalb, DuPage, LaSalle, Will, and Cook counties in Illinois. Old Second Bancorp, Inc. was founded in 1982 and is headquartered in Aurora, Illinois.

First Business Financial Services Company Profile

First Business Financial Services, Inc. operates as the bank holding company for First Business Bank that provides commercial banking products and services for small and medium-sized businesses, business owners, executives, professionals, and high net worth individuals. The company's deposit products include non-interest-bearing transaction accounts, interest-bearing transaction accounts, money market accounts, and time deposits, as well as certificates of deposit. It also provides loan products, such as commercial real estate loans, commercial and industrial loans, small business administration loans, and direct financing leases, as well as consumer and other loans comprising home equity, second mortgage, credit card, and other personal loans for professional and executive clients. In addition, the company offers commercial lending, asset-based financing, equipment financing, treasury management, trust and investment, and factoring services. Further, it provides lines of credit and factored receivable financing, as well as term loans secured by accounts receivable, inventory, equipment, and real estate assets primarily to manufacturers and wholesale distribution companies; and new and replacement equipment loan and lease, debt restructuring, consolidation, and sale-lease-back transaction services. Additionally, the company holds an equity investment in a Madison, Wisconsin community development project; and invests in marketable securities. First Business Financial Services, Inc. was incorporated in 1986 and is headquartered in Madison, Wisconsin.

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