Reviewing QCR (NASDAQ:QCRH) and Franklin Financial Network (NASDAQ:FSB)

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QCR (NASDAQ:QCRH) and Franklin Financial Network (NYSE:FSB) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, risk, analyst recommendations, valuation, institutional ownership, profitability and earnings.

Risk & Volatility

QCR has a beta of 0.81, indicating that its stock price is 19% less volatile than the S&P 500. Comparatively, Franklin Financial Network has a beta of 1.36, indicating that its stock price is 36% more volatile than the S&P 500.

Profitability

This table compares QCR and Franklin Financial Network’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
QCR 18.53% 10.82% 1.04%
Franklin Financial Network 11.40% 8.23% 0.74%

Dividends

QCR pays an annual dividend of $0.24 per share and has a dividend yield of 0.6%. Franklin Financial Network pays an annual dividend of $0.16 per share and has a dividend yield of 0.5%. QCR pays out 7.8% of its earnings in the form of a dividend. Franklin Financial Network pays out 5.9% 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.

Analyst Recommendations

This is a breakdown of recent ratings for QCR and Franklin Financial Network, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
QCR 0 0 3 0 3.00
Franklin Financial Network 1 2 2 0 2.20

QCR presently has a consensus price target of $42.33, suggesting a potential upside of 7.66%. Franklin Financial Network has a consensus price target of $33.50, suggesting a potential upside of 7.75%. Given Franklin Financial Network’s higher probable upside, analysts clearly believe Franklin Financial Network is more favorable than QCR.

Institutional and Insider Ownership

60.1% of QCR shares are held by institutional investors. Comparatively, 64.3% of Franklin Financial Network shares are held by institutional investors. 7.2% of QCR shares are held by insiders. Comparatively, 11.7% of Franklin Financial Network shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Earnings and Valuation

This table compares QCR and Franklin Financial Network’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
QCR $224.42 million 2.76 $43.12 million $3.08 12.77
Franklin Financial Network $180.61 million 2.52 $34.51 million $2.71 11.47

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

Summary

QCR beats Franklin Financial Network on 11 of the 16 factors compared between the two stocks.

About QCR

QCR Holdings, Inc., a multi-bank holding company, provides commercial and consumer banking, and trust and asset management services. The company operates through Commercial Banking and Wealth Management segments. Its deposit products include noninterest and interest-bearing demand, time, and brokered time deposits. The company also provides various commercial and retail lending/leasing, and investment services to corporations, partnerships, individuals, and government agencies. Its loan portfolio comprises loans to small and mid-sized businesses; business loans, including lines of credit for working capital and operational purposes; term loans for the acquisition of facilities, equipment, and other purposes; commercial and residential real estate loans; and installment and other consumer loans, such as home improvement, home equity, motor vehicle, and signature loans, as well as small personal credit lines. In addition, the company engages in leasing machinery and equipment to commercial and industrial businesses under direct financing lease contracts; and issuing various trust preferred securities. It serves the Quad Cities, Cedar Rapids, Waterloo/Cedar Falls, Des Moines/Ankeny, and Rockford communities. The company was founded in 1993 and is headquartered in Moline, Illinois.

About Franklin Financial Network

Franklin Financial Network, Inc. operates as the bank holding company for Franklin Synergy Bank that provides banking and related financial services to small businesses, corporate entities, local governments, and individuals. Its deposit products include checking, savings, and certificate of deposit accounts; and demand deposits, interest-bearing transaction accounts, money market accounts, and municipal deposits. The company also provides construction and land development, commercial real estate, residential real estate, commercial and industrial, and consumer and other loans. In addition, it offers retirement planning, financial planning, and investment services, as well as insurance products; and Internet banking, remote deposit capture, lockbox, and treasury management services. The company operates through 15 branches and a loan production office in the Williamson, Rutherford, and Davidson counties in the Nashville metropolitan area. Franklin Financial Network, Inc. was founded in 2007 and is headquartered in Franklin, Tennessee.

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