German American Bancorp (NASDAQ: GABC) and Provident Financial Services (NYSE:PFS) are both small-cap finance companies, but which is the better stock? We will contrast the two companies based on the strength of their analyst recommendations, profitability, institutional ownership, risk, dividends, valuation and earnings.

Profitability

This table compares German American Bancorp and Provident Financial Services’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
German American Bancorp 28.12% 11.60% 1.34%
Provident Financial Services 25.90% 7.61% 1.02%

Volatility & Risk

German American Bancorp has a beta of 1.17, indicating that its stock price is 17% more volatile than the S&P 500. Comparatively, Provident Financial Services has a beta of 1.01, indicating that its stock price is 1% more volatile than the S&P 500.

Institutional and Insider Ownership

36.3% of German American Bancorp shares are held by institutional investors. Comparatively, 61.4% of Provident Financial Services shares are held by institutional investors. 8.5% of German American Bancorp shares are held by insiders. Comparatively, 2.9% of Provident Financial Services shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

German American Bancorp pays an annual dividend of $0.52 per share and has a dividend yield of 1.4%. Provident Financial Services pays an annual dividend of $0.80 per share and has a dividend yield of 2.9%. German American Bancorp pays out 32.6% of its earnings in the form of a dividend. Provident Financial Services pays out 53.0% 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. German American Bancorp has increased its dividend for 6 consecutive years.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for German American Bancorp and Provident Financial Services, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
German American Bancorp 0 3 0 0 2.00
Provident Financial Services 0 4 2 0 2.33

German American Bancorp currently has a consensus price target of $38.67, suggesting a potential upside of 7.47%. Provident Financial Services has a consensus price target of $26.88, suggesting a potential downside of 1.19%. Given German American Bancorp’s higher probable upside, analysts plainly believe German American Bancorp is more favorable than Provident Financial Services.

Earnings & Valuation

This table compares German American Bancorp and Provident Financial Services’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
German American Bancorp $130.86 million 6.30 $36.61 million $1.60 22.53
Provident Financial Services $318.11 million 5.68 $100.34 million $1.51 18.01

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

Summary

German American Bancorp beats Provident Financial Services on 11 of the 17 factors compared between the two stocks.

About German American Bancorp

German American Bancorp, Inc. is a bank holding company. As of December 31, 2016, the Company, through its banking subsidiary German American Bancorp, operated 51 banking offices in 19 contiguous southern Indiana counties and one northern Kentucky county. Its segments are core banking, trust and investment advisory services, insurance, and other. The core banking segment involves attracting deposits from the general public and using such funds to originate consumer, commercial and agricultural, commercial and agricultural real estate, and residential mortgage loans, primarily in its local markets. The core banking segment also involves the sale of residential mortgage loans in the secondary market. The trust and investment advisory services segment involves providing trust, investment advisory, and brokerage services to customers. The insurance segment offers a range of personal and corporate property and casualty insurance products, in its banking subsidiary’s local markets.

About Provident Financial Services

Provident Financial Services Inc. is a holding company for The Provident Bank (the Bank). The Bank is a New Jersey-chartered capital stock savings bank. As a community and customer-oriented institution, the Bank provides personal service and customer convenience in serving the financial needs of the individuals, families and businesses residing in its primary markets areas. The Bank attracts deposits from the general public and businesses in the areas surrounding its banking offices and uses those funds, together with funds generated from operations and borrowings, to originate commercial real estate loans, residential mortgage loans, commercial business loans and consumer loans. The Bank also invests in mortgage-backed securities and other permissible investments. It operates service branch offices in the New Jersey counties of Hudson, Bergen, Essex, Mercer, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, as well as in Bucks, Lehigh and Northampton counties in Pennsylvania.

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