Critical Comparison: First Business Financial Services (FBIZ) vs. State Bank Financial (STBZ)

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First Business Financial Services (NASDAQ: STBZ) and State Bank Financial (NASDAQ:STBZ) are both small-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their risk, profitability, earnings, dividends, institutional ownership, analyst recommendations and valuation.

Dividends

First Business Financial Services pays an annual dividend of $0.56 per share and has a dividend yield of 2.5%. State Bank Financial pays an annual dividend of $0.80 per share and has a dividend yield of 2.5%. First Business Financial Services pays out 41.5% of its earnings in the form of a dividend. State Bank Financial pays out 54.8% 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. State Bank Financial has raised its dividend for 5 consecutive years. First Business Financial Services is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares First Business Financial Services and State Bank Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
First Business Financial Services 13.86% 7.94% 0.73%
State Bank Financial 20.06% 10.64% 1.38%

Analyst Ratings

This is a breakdown of recent ratings for First Business Financial Services and State Bank Financial, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
First Business Financial Services 0 1 2 0 2.67
State Bank Financial 0 6 1 0 2.14

First Business Financial Services currently has a consensus price target of $26.67, suggesting a potential upside of 19.26%. State Bank Financial has a consensus price target of $35.90, suggesting a potential upside of 11.01%. Given First Business Financial Services’ stronger consensus rating and higher possible upside, research analysts plainly believe First Business Financial Services is more favorable than State Bank Financial.

Volatility & Risk

First Business Financial Services has a beta of 0.76, suggesting that its stock price is 24% less volatile than the S&P 500. Comparatively, State Bank Financial has a beta of 0.85, suggesting that its stock price is 15% less volatile than the S&P 500.

Institutional and Insider Ownership

62.7% of First Business Financial Services shares are held by institutional investors. Comparatively, 79.0% of State Bank Financial shares are held by institutional investors. 6.2% of First Business Financial Services shares are held by company insiders. Comparatively, 4.4% of State Bank Financial shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Earnings & Valuation

This table compares First Business Financial Services and State Bank Financial’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
First Business Financial Services $92.48 million 2.12 $11.90 million $1.35 16.56
State Bank Financial $248.13 million 5.10 $46.57 million $1.46 22.15

State Bank Financial has higher revenue and earnings than First Business Financial Services. First Business Financial Services is trading at a lower price-to-earnings ratio than State Bank Financial, indicating that it is currently the more affordable of the two stocks.

Summary

State Bank Financial beats First Business Financial Services on 11 of the 17 factors compared between the two stocks.

About First Business Financial Services

First Business Financial Services, Inc. operates as a bank holding company, which engages in the provision of commercial banking services. It offers treasury and investment management, commercial lending, equipment finance, retirement plans, trust and estate administration, private banking, and asset-based lending. The company was founded in 1986 and is headquartered in Madison, WI.

About State Bank Financial

State Bank Financial Corporation operates as the bank holding company for State Bank and Trust Company that provides various community banking services to individuals and businesses. The company's deposit products and services include checking, commercial operating, savings and money market, and individual retirement accounts, as well as short- to longer-term certificates of deposit, commercial and consumer demand deposit, and savings and time deposit products. It also provides commercial and residential real estate mortgage, real estate construction, commercial and industrial, agriculture and consumer, real estate, real estate construction and development, commercial, financial, and agricultural loans, as well as loans to small and medium-sized businesses. In addition, the company offers correspondent banking products; payment solutions for funds collection and concentration services, such as ACH origination, electronic bill presentment and payment, remote deposit capture and cash deposit, retail and wholesale lockbox, and wire services. Further, it provides cash management accounts; disbursement services comprising online bill pay, person-to-person payments, and bank-to-bank transfers; fraud controls that include Positive Pay, ACH Decisioning, and IBM Security Trusteer Rapport malware protection; and online cash management systems. Additionally, the company offers payroll services, which comprise automated human resources information system, payroll, benefit, labor management, and insurance services; and online banking and bill payment, safe deposit box rental, debit card, and automated teller machine card services. As of December 31, 2017, it operated 32 full-service banking offices in Georgia, which comprises Bibb, Chatham, Clarke, Cobb, Columbia, Dooly, Fulton, Gwinnett, Hall, Houston, Jones, Liberty, McDuffie, Richmond, and Tattnall counties. The company was founded in 2005 and is headquartered in Atlanta, Georgia.

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