Financial Analysis: FS Bancorp (NASDAQ:FSBW) and Cathay General Bancorp (NASDAQ:CATY)

FS Bancorp (NASDAQ:FSBW) and Cathay General Bancorp (NASDAQ:CATY) are both finance companies, but which is the better business? We will compare the two companies based on the strength of their profitability, institutional ownership, valuation, risk, analyst recommendations, earnings and dividends.

Valuation and Earnings

This table compares FS Bancorp and Cathay General Bancorp”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
FS Bancorp	$219.52 million	1.07	$33.35 million	$4.29	10.07
Cathay General Bancorp	$1.38 billion	3.00	$315.12 million	$4.85	12.79

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

Profitability

This table compares FS Bancorp and Cathay General Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
FS Bancorp	14.91%	10.88%	1.04%
Cathay General Bancorp	23.79%	11.37%	1.38%

Dividends

FS Bancorp pays an annual dividend of $1.16 per share and has a dividend yield of 2.7%. Cathay General Bancorp pays an annual dividend of $1.52 per share and has a dividend yield of 2.4%. FS Bancorp pays out 27.0% of its earnings in the form of a dividend. Cathay General Bancorp pays out 31.3% 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. FS Bancorp has raised its dividend for 12 consecutive years. FS Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a breakdown of recent recommendations for FS Bancorp and Cathay General Bancorp, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
FS Bancorp	0	1	1	0	2.50
Cathay General Bancorp	1	3	1	1	2.33

FS Bancorp presently has a consensus target price of $46.00, suggesting a potential upside of 6.43%. Cathay General Bancorp has a consensus target price of $51.75, suggesting a potential downside of 16.60%. Given FS Bancorp’s stronger consensus rating and higher possible upside, equities research analysts plainly believe FS Bancorp is more favorable than Cathay General Bancorp.

Insider & Institutional Ownership

63.9% of FS Bancorp shares are owned by institutional investors. Comparatively, 75.0% of Cathay General Bancorp shares are owned by institutional investors. 12.9% of FS Bancorp shares are owned by insiders. Comparatively, 4.5% of Cathay General Bancorp shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Volatility & Risk

FS Bancorp has a beta of 0.66, meaning that its share price is 34% less volatile than the S&P 500. Comparatively, Cathay General Bancorp has a beta of 0.86, meaning that its share price is 14% less volatile than the S&P 500.

Summary

Cathay General Bancorp beats FS Bancorp on 11 of the 17 factors compared between the two stocks.

About FS Bancorp

FS Bancorp, Inc. operates as a bank holding company for 1st Security Bank of Washington that provides banking and financial services to local families, local and regional businesses, and industry niches. The company operates in two segments, Commercial and Consumer Banking; and Home Lending. It offers various deposit instruments, including checking accounts, money market deposit accounts, savings accounts, and certificates of deposit. The company provides one-to-four-family residential first mortgages, second mortgage/home equity loan products, non-mortgage commercial business loans, commercial real estate loans, and construction and development loans, as well as consumer loans, which primarily include personal lines of credit, credit cards, automobile, direct home improvement, loans on deposit, and recreational loans. It operates full bank service branches and home loan production offices in suburban communities in the greater Puget Sound area, including Snohomish, King, Pierce, Jefferson, Kitsap, Clallam, Grays Harbor, and Thurston counties; and a loan production office in the market area of the Tri-Cities. FS Bancorp, Inc. was founded in 1936 and is headquartered in Mountlake Terrace, Washington.

About Cathay General Bancorp

Cathay General Bancorp operates as the holding company for Cathay Bank that offers various commercial banking products and services to individuals, professionals, and small to medium-sized businesses in the United States. The company offers various deposit products, including passbook accounts, checking accounts, money market deposit accounts, certificates of deposit, individual retirement accounts, and public funds deposits. It also provides loan products, such as commercial mortgage loans, commercial loans, small business administration loans, residential mortgage loans, real estate construction loans, and home equity lines of credit, as well as installment loans to individuals for household, and other consumer expenditures. In addition, the company offers trade financing, letter of credit, wire transfer, forward currency spot and forward contract, safe deposit, collection, automatic teller machine, Internet banking, investment, and other customary bank services, as well as securities and insurance products. Cathay General Bancorp was founded in 1962 and is headquartered in Los Angeles, California.