Heritage Financial (HFWA) & Home BancShares (HOMB) Head-To-Head Review

Heritage Financial (NASDAQ: HFWA) and Home BancShares (NASDAQ:HOMB) are both finance companies, but which is the better business? We will contrast the two companies based on the strength of their dividends, valuation, institutional ownership, earnings, profitability, risk and analyst recommendations.

Insider & Institutional Ownership

78.1% of Heritage Financial shares are held by institutional investors. Comparatively, 63.5% of Home BancShares shares are held by institutional investors. 2.7% of Heritage Financial shares are held by insiders. Comparatively, 11.3% of Home BancShares shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Risk & Volatility

Heritage Financial has a beta of 0.47, indicating that its stock price is 53% less volatile than the S&P 500. Comparatively, Home BancShares has a beta of 1.18, indicating that its stock price is 18% more volatile than the S&P 500.

Earnings and Valuation

This table compares Heritage Financial and Home BancShares’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Heritage Financial $170.13 million 5.59 $38.91 million $1.38 23.04
Home BancShares $523.59 million 8.29 $177.14 million $1.12 22.33

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

Analyst Ratings

This is a breakdown of current ratings for Heritage Financial and Home BancShares, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Heritage Financial 0 2 2 0 2.50
Home BancShares 0 4 2 0 2.33

Heritage Financial presently has a consensus price target of $34.00, suggesting a potential upside of 6.92%. Home BancShares has a consensus price target of $27.75, suggesting a potential upside of 10.96%. Given Home BancShares’ higher possible upside, analysts clearly believe Home BancShares is more favorable than Heritage Financial.

Dividends

Heritage Financial pays an annual dividend of $0.52 per share and has a dividend yield of 1.6%. Home BancShares pays an annual dividend of $0.44 per share and has a dividend yield of 1.8%. Heritage Financial pays out 37.7% of its earnings in the form of a dividend. Home BancShares pays out 39.3% 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.

Profitability

This table compares Heritage Financial and Home BancShares’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Heritage Financial 23.48% 8.42% 1.05%
Home BancShares 28.19% 12.00% 1.70%

Summary

Home BancShares beats Heritage Financial on 10 of the 15 factors compared between the two stocks.

About Heritage Financial

Heritage Financial Corporation is a bank holding company. The Company is engaged in the business of planning, directing and coordinating the business activities of its bank subsidiary, Heritage Bank (the Bank). The Bank’s lending activities focus on commercial business lending. The Bank also originates consumer loans, real estate construction and land development loans, and one- to four-family residential loans. The Bank’s investment securities available for sale include the United States treasury and the United States Government-sponsored agencies; municipal securities; mortgage-backed securities and collateralized mortgage obligations, which include residential and commercial; collateralized loan obligations; corporate obligations, and other securities. The Bank’s primary sources of funds are deposits and loan repayments. Borrowings are used on a short-term basis to compensate for reductions in other sources of funds, such as deposit inflows.

About Home BancShares

Home BancShares, Inc. is a bank holding company. The Company is engaged in providing a range of commercial and retail banking, and related financial services to businesses, real estate developers and investors, individuals and municipalities through its community bank subsidiary, Centennial Bank (the Bank). It operates through community banking segment. It offers a range of products and services, including Internet banking, mobile banking and voice response information, cash management, overdraft protection, direct deposit, safe deposit boxes, the United States savings bonds and automatic account transfers. The Bank has locations in Arkansas, Florida, South Alabama and New York City. As of September 26, 2017, the Company conducted business principally through 76 branches in Arkansas, 89 branches in Florida, six branches in Alabama and one branch in New York City. It originates loans secured by single and multi-family real estate, residential construction and commercial buildings.

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