Guaranty Federal Bancshares (NASDAQ: GFED) and City (NASDAQ:CHCO) are both small-cap financials companies, but which is the superior business? We will compare the two companies based on the strength of their dividends, earnings, institutional ownership, risk, profitability, valuation and analyst recommendations.

Insider & Institutional Ownership

25.8% of Guaranty Federal Bancshares shares are held by institutional investors. Comparatively, 65.0% of City shares are held by institutional investors. 10.0% of Guaranty Federal Bancshares shares are held by company insiders. Comparatively, 3.9% of City shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares Guaranty Federal Bancshares and City’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Guaranty Federal Bancshares $30.26 million 3.36 $5.59 million $1.41 16.31
City $190.98 million 5.50 $52.12 million $3.84 17.52

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

Profitability

This table compares Guaranty Federal Bancshares and City’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Guaranty Federal Bancshares 18.63% 8.65% 0.85%
City 29.25% 12.34% 1.45%

Analyst Ratings

This is a breakdown of current recommendations for Guaranty Federal Bancshares and City, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Guaranty Federal Bancshares 0 0 1 0 3.00
City 0 3 0 0 2.00

Guaranty Federal Bancshares currently has a consensus price target of $25.00, suggesting a potential upside of 8.70%. City has a consensus price target of $68.33, suggesting a potential upside of 1.60%. Given Guaranty Federal Bancshares’ stronger consensus rating and higher possible upside, research analysts clearly believe Guaranty Federal Bancshares is more favorable than City.

Dividends

Guaranty Federal Bancshares pays an annual dividend of $0.48 per share and has a dividend yield of 2.1%. City pays an annual dividend of $1.76 per share and has a dividend yield of 2.6%. Guaranty Federal Bancshares pays out 34.0% of its earnings in the form of a dividend. City pays out 45.8% 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.

Risk and Volatility

Guaranty Federal Bancshares has a beta of 0.52, meaning that its share price is 48% less volatile than the S&P 500. Comparatively, City has a beta of 0.84, meaning that its share price is 16% less volatile than the S&P 500.

Summary

City beats Guaranty Federal Bancshares on 11 of the 16 factors compared between the two stocks.

About Guaranty Federal Bancshares

Guaranty Federal Bancshares, Inc. is the savings and loan holding company for Guaranty Federal Savings Bank (the Bank). The Company operates through banking operation segment. The banking segment is engaged in the business of originating mortgage loans secured by one- to four-family residences, multi-family, construction, commercial and consumer loans. The Bank’s primary market areas are Greene and Christian Counties, which are in the southwestern corner of Missouri, and includes the cities of Springfield, Nixa and Ozark, and Missouri. The Bank’s loan portfolio consists of mortgage loans, including one- to four-family loans, multi-family loans, construction loans and commercial real estate loans; commercial business loans, and consumer loans. The Bank invests in mortgage-backed securities, the United States Government and federal agency securities, and other marketable securities. The Company owns Guaranty Statutory Trust I and Guaranty Statutory Trust II.

About City

City Holding Company is a financial holding company. The Company conducts its principal activities through its subsidiary, City National Bank of West Virginia (City National). As of December 31, 2016, the City National provided banking, trust and investment management and other financial solutions through its network of 85 banking offices located in the states of West Virginia, Virginia, eastern Kentucky and southeastern Ohio. City National offers various products and services, including commercial banking, consumer banking, mortgage banking, and wealth management and trust services. City National provides credit, deposit and investment advisory products and services to rural and small community markets in addition to cities, including Charleston, Huntington, Martinsburg, Winchester, Staunton, Virginia Beach, Ashland and Lexington. City National offers a range of commercial banking services to corporations and other business customers.

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