Northwest Bancshares (NASDAQ: NWBI) and Provident Financial Holdings (NASDAQ:PROV) are both small-cap finance companies, but which is the superior investment? We will compare the two companies based on the strength of their earnings, analyst recommendations, valuation, profitabiliy, dividends, risk and institutional ownership.

Analyst Ratings

This is a breakdown of recent recommendations for Northwest Bancshares and Provident Financial Holdings, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Northwest Bancshares 1 2 0 0 1.67
Provident Financial Holdings 0 3 0 0 2.00

Northwest Bancshares presently has a consensus target price of $16.33, indicating a potential upside of 1.45%. Provident Financial Holdings has a consensus target price of $20.00, indicating a potential upside of 4.28%. Given Provident Financial Holdings’ stronger consensus rating and higher possible upside, analysts clearly believe Provident Financial Holdings is more favorable than Northwest Bancshares.

Dividends

Northwest Bancshares pays an annual dividend of $0.64 per share and has a dividend yield of 4.0%. Provident Financial Holdings pays an annual dividend of $0.52 per share and has a dividend yield of 2.7%. Northwest Bancshares pays out 75.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Provident Financial Holdings pays out 81.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Northwest Bancshares is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Northwest Bancshares and Provident Financial Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Northwest Bancshares 18.91% 7.45% 0.91%
Provident Financial Holdings 7.11% 3.93% 0.43%

Insider and Institutional Ownership

66.4% of Northwest Bancshares shares are held by institutional investors. Comparatively, 58.0% of Provident Financial Holdings shares are held by institutional investors. 2.0% of Northwest Bancshares shares are held by insiders. Comparatively, 15.7% of Provident Financial Holdings shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares Northwest Bancshares and Provident Financial Holdings’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Northwest Bancshares $414.28 million 3.98 $87.11 million $0.85 18.94
Provident Financial Holdings $67.60 million 2.19 $4.94 million $0.64 29.97

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

Summary

Northwest Bancshares beats Provident Financial Holdings on 10 of the 14 factors compared between the two stocks.

Northwest Bancshares Company Profile

Northwest Bancshares, Inc. (Northwest) is a savings and loan holding company. The Company’s principal business consists of attracting deposits and making loans secured by various types of collateral, including real estate and other assets in the markets in which it operates. Its segments include Community Banking and Consumer Finance. The Community Banking segment includes its savings bank subsidiary, Northwest Bank, as well as the subsidiaries of the savings bank that provide similar products and services. The bank is a community-oriented institution that offers a range of personal and business deposit and loan products, including mortgage, consumer, and commercial loans, as well as trust, investment management, actuarial and benefit plan administration, and brokerage services typically offered by a full service financial institution. The Consumer Finance segment comprises Northwest Consumer Discount Company, a subsidiary of Northwest Bank.

Provident Financial Holdings Company Profile

Provident Financial Holdings, Inc. is the holding company of Provident Savings Bank, F.S.B. (the Bank). The Bank is a federally chartered stock savings bank. The Company operates through two segments: Provident Bank and Provident Bank Mortgage (PBM). The Bank’s operations primarily consist of accepting deposits from customers within the communities surrounding the Bank’s full service offices and investing those funds in single-family loans, multi-family loans, commercial real estate loans, construction loans, commercial business loans, consumer loans and other mortgage loans. PBM operations primarily consist of the origination, purchase and sale of mortgage loans secured by single-family residences. The Bank is a financial services company committed to serving consumers and small to mid-sized businesses in the Inland Empire region of Southern California. The Bank offers business checking accounts, other business banking services and services loans for others.

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