First Financial Bankshares (FFIN) and Cadence Bancorp (CADE) Critical Analysis

First Financial Bankshares (NASDAQ: FFIN) and Cadence Bancorp (NYSE:CADE) are both mid-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, valuation, profitability, institutional ownership, risk, analyst recommendations and earnings.

Dividends

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First Financial Bankshares pays an annual dividend of $0.76 per share and has a dividend yield of 1.6%. Cadence Bancorp pays an annual dividend of $0.50 per share and has a dividend yield of 1.8%. First Financial Bankshares pays out 44.7% of its earnings in the form of a dividend. Cadence Bancorp pays out 33.8% 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. Cadence Bancorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares First Financial Bankshares and Cadence Bancorp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
First Financial Bankshares 35.72% 12.61% 1.60%
Cadence Bancorp 20.60% 9.50% 1.18%

Earnings and Valuation

This table compares First Financial Bankshares and Cadence Bancorp’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
First Financial Bankshares $336.99 million 9.63 $120.37 million $1.70 28.26
Cadence Bancorp $430.78 million 5.45 $102.35 million $1.48 18.95

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

Analyst Recommendations

This is a breakdown of current ratings for First Financial Bankshares and Cadence Bancorp, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
First Financial Bankshares 1 5 0 0 1.83
Cadence Bancorp 0 3 6 0 2.67

First Financial Bankshares presently has a consensus target price of $43.50, indicating a potential downside of 9.47%. Cadence Bancorp has a consensus target price of $27.50, indicating a potential downside of 1.96%. Given Cadence Bancorp’s stronger consensus rating and higher probable upside, analysts clearly believe Cadence Bancorp is more favorable than First Financial Bankshares.

Insider & Institutional Ownership

51.5% of First Financial Bankshares shares are held by institutional investors. Comparatively, 23.7% of Cadence Bancorp shares are held by institutional investors. 4.8% of First Financial Bankshares shares are held by insiders. Comparatively, 0.1% of Cadence Bancorp shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Summary

First Financial Bankshares beats Cadence Bancorp on 9 of the 15 factors compared between the two stocks.

About First Financial Bankshares

First Financial Bankshares, Inc., through its subsidiaries, provides commercial banking products and services primarily in Texas. The company accepts checking, savings, and time deposits; and offers real estate, commercial, agricultural, and consumer loans to businesses, professionals, individuals, and farm and ranch operations. It also provides automated teller machines, drive-in and night deposit, safe deposit facilities, remote deposit capture, Internet banking, mobile banking, payroll cards, funds transmitting, and other customary commercial banking services. In addition, the company offers personal trust services, including wealth management, administration of estates, testamentary trusts, revocable and irrevocable trusts, and agency accounts; and securities brokerage services, as well as administers retirement and employee benefit accounts, such as 401(k) profit sharing plans and IRAs;. As of December 31, 2017, it had 69 financial centers in Texas, including Abilene, San Angelo, Weatherford, Cleburne, Conroe, Stephenville, Granbury, Acton, Albany, Aledo, Alvarado, Beaumont, Boyd, Bridgeport, Brock, Burleson, Cisco, Clyde, Cut and Shoot, Decatur, Eastland, Fort Worth, Glen Rose, Grapevine, Hereford, Huntsville, Keller, Magnolia, Mauriceville, Merkel, Midlothian, Mineral Wells, Montgomery, Moran, New Waverly, Newton, Odessa, Orange, Port Arthur, Ranger, Rising Star, Roby, Southlake, Sweetwater, Tomball, Trent, Trophy Club, Vidor, Waxahachie, Willis, Willow Park, Kingwood, Fulshear, El Campo, and Palacios. First Financial Bankshares, Inc. was founded in 1890 and is based in Abilene, Texas.

About Cadence Bancorp

Cadence Bancorp is a bank holding company. The company is focused on providing range of banking and wealth management services to businesses, individuals, business owners and retail customers. It operates through three segments: Banking, Financial Services and Corporate. The Banking segment offers a range of deposit products and lending services through its commercial banking, retail banking and private banking business lines. It offers retail deposit products, including checking accounts, savings accounts, money market accounts and other deposit accounts through its branch networks and online, mobile and telephone banking platforms. The Financial Services segment provides a set of investment, retirement, estate, college and business succession planning, retail brokerage, personal and institutional trust services and insurance services through three product lines: Investment Management, Trust Services and Insurance Services .The Corporate Segment reflects parent-only activities, including debt and capital raising, and intercompany eliminations. Cadence Bancorp was founded in 2009 and is headquartered in Houston, TX.

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