Comparing Heritage Financial (NASDAQ:HFWA) & Pathfinder Bancorp (NASDAQ:PBHC)

Heritage Financial (NASDAQ:HFWA) and Pathfinder Bancorp (NASDAQ:PBHC) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their earnings, dividends, risk, institutional ownership, valuation, profitability and analyst recommendations.

Risk and Volatility

Heritage Financial has a beta of 0.53, suggesting that its share price is 47% less volatile than the S&P 500. Comparatively, Pathfinder Bancorp has a beta of 0.12, suggesting that its share price is 88% less volatile than the S&P 500.

Institutional and Insider Ownership

78.3% of Heritage Financial shares are owned by institutional investors. Comparatively, 26.7% of Pathfinder Bancorp shares are owned by institutional investors. 1.8% of Heritage Financial shares are owned by company insiders. Comparatively, 15.4% of Pathfinder Bancorp shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares Heritage Financial and Pathfinder Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Heritage Financial	20.10%	8.61%	1.10%
Pathfinder Bancorp	-4.16%	-2.73%	-0.23%

Dividends

Heritage Financial pays an annual dividend of $0.96 per share and has a dividend yield of 3.5%. Pathfinder Bancorp pays an annual dividend of $0.40 per share and has a dividend yield of 3.0%. Heritage Financial pays out 49.0% of its earnings in the form of a dividend. Pathfinder Bancorp pays out -66.7% 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. Heritage Financial has raised its dividend for 14 consecutive years and Pathfinder Bancorp has raised its dividend for 1 consecutive years. Heritage Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of recent ratings and price targets for Heritage Financial and Pathfinder Bancorp, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Heritage Financial	0	4	2	0	2.33
Pathfinder Bancorp	1	0	0	0	1.00

Heritage Financial presently has a consensus price target of $31.25, suggesting a potential upside of 12.69%. Given Heritage Financial’s stronger consensus rating and higher probable upside, equities analysts plainly believe Heritage Financial is more favorable than Pathfinder Bancorp.

Earnings & Valuation

This table compares Heritage Financial and Pathfinder Bancorp”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Heritage Financial	$335.97 million	2.80	$67.53 million	$1.96	14.15
Pathfinder Bancorp	$79.15 million	0.81	-$3.42 million	($0.60)	-22.24

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

Summary

Heritage Financial beats Pathfinder Bancorp on 15 of the 17 factors compared between the two stocks.

About Heritage Financial

Heritage Financial Corporation operates as the bank holding company for Heritage Bank that provides various financial services to small and medium sized businesses and individuals in the United States. It accepts various deposit products, such as noninterest demand deposits, interest bearing demand deposits, money market accounts, savings accounts, personal checking accounts, and certificates of deposit. The company’s loan portfolio includes commercial and industrial loans, owner-occupied and non-owner occupied commercial real estate loans, one-to-four family residential loans, real estate construction and land development loans, consumer loans, commercial business loans, lines of credit, term equipment financing, and term real estate loans, as well as commercial business loans to a range of businesses in industries that include real estate and rental and leasing, healthcare, accommodation and food services, retail trade, and construction. It also originates loans that are guaranteed by the U.S. Small Business Administration; and provides objective advice from trusted advisers. The company was formerly known as Heritage Financial Corporation, M.H.C. and changed its name to Heritage Financial Corporation in 1998. Heritage Financial Corporation was founded in 1927 and is headquartered in Olympia, Washington.

About Pathfinder Bancorp

Pathfinder Bancorp, Inc. operates as a bank holding company for Pathfinder Bank that provides various banking and financial products and services in New York. The company's deposit products include checking, savings, and money market deposit accounts; certificates of deposit; and demand and time deposits. Its loan portfolio comprises commercial real estate, commercial, residential real estate, construction, and tax-exempt loans; home equity loans and junior liens; and consumer loans comprising automobile, recreational vehicles, and unsecured personal loans, as well as unsecured lines of credit and loans secured by deposit accounts. The company is also involved in the property, casualty, and life insurance brokerage business. It primarily serves individuals, families, small to mid-size businesses, and municipalities. The company was founded in 1859 and is headquartered in Oswego, New York.