Critical Contrast: Capitol Federal Financial (NASDAQ:CFFN) and Waterstone Financial (NASDAQ:WSBF)

Capitol Federal Financial (NASDAQ:CFFN) and Waterstone Financial (NASDAQ:WSBF) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, earnings, valuation, institutional ownership, risk, profitability and analyst recommendations.

Profitability

This table compares Capitol Federal Financial and Waterstone Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Capitol Federal Financial 26.77% 7.02% 1.01%
Waterstone Financial 16.28% 8.42% 1.67%

Risk and Volatility

Capitol Federal Financial has a beta of 0.53, indicating that its share price is 47% less volatile than the S&P 500. Comparatively, Waterstone Financial has a beta of 0.08, indicating that its share price is 92% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Capitol Federal Financial and Waterstone Financial, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capitol Federal Financial 0 0 0 0 N/A
Waterstone Financial 0 0 1 0 3.00

Waterstone Financial has a consensus price target of $19.50, suggesting a potential upside of 5.46%. Given Waterstone Financial’s higher possible upside, analysts clearly believe Waterstone Financial is more favorable than Capitol Federal Financial.

Valuation and Earnings

This table compares Capitol Federal Financial and Waterstone Financial’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Capitol Federal Financial $351.91 million 5.57 $94.24 million N/A N/A
Waterstone Financial $191.90 million 2.62 $30.75 million N/A N/A

Capitol Federal Financial has higher revenue and earnings than Waterstone Financial.

Dividends

Capitol Federal Financial pays an annual dividend of $0.34 per share and has a dividend yield of 2.5%. Waterstone Financial pays an annual dividend of $0.48 per share and has a dividend yield of 2.6%.

Insider and Institutional Ownership

74.8% of Capitol Federal Financial shares are held by institutional investors. Comparatively, 60.7% of Waterstone Financial shares are held by institutional investors. 2.1% of Capitol Federal Financial shares are held by company insiders. Comparatively, 12.1% of Waterstone Financial shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Summary

Capitol Federal Financial beats Waterstone Financial on 7 of the 13 factors compared between the two stocks.

Capitol Federal Financial Company Profile

Capitol Federal Financial, Inc. operates as the holding company for Capitol Federal Savings Bank that provides various retail banking products and services in the United States. The company accepts a range of deposit products, including savings accounts, money market accounts, interest-bearing and non-interest-bearing checking accounts, and certificates of deposits. It also provides various loan products, such as one- to four-family residential real estate loans; construction-to-permanent loans; consumer loans comprising home equity loans and lines of credit, home improvement loans, vehicle loans, and loans secured by savings deposits; and commercial real estate loans that include various property types, which comprise hotels, office and retail buildings, senior housing facilities, and multi-family dwellings located in Texas, Missouri, Kansas, Kentucky, Nebraska, Colorado, Arkansas, California, Montana, and Arizona. In addition, the company offers mobile, telephone, and online banking services, as well as bill payment services; operates a call center; invests in various securities; and engages in the reinsurance and real estate businesses. It operates a network of 58 branches, including 48 traditional branches and 10 in-store branches located in 9 counties throughout Kansas and 3 counties in Missouri. The company serves the metropolitan areas of Topeka, Wichita, Lawrence, Manhattan, Emporia, and Salina, Kansas, as well as the metropolitan area of greater Kansas. Capitol Federal Financial, Inc. was founded in 1893 and is headquartered in Topeka, Kansas.

Waterstone Financial Company Profile

Waterstone Financial, Inc. operates as a bank holding company for WaterStone Bank SSB that provides various financial services to customers in southeastern Wisconsin, the United States. It operates through two segments, Community Banking and Mortgage Banking. The Community Banking segment offers consumer and business banking products and services, such as deposit and transactional solutions, including checking accounts, online banking and bill pay services, and money transfer services, as well as credit, debit, and pre-paid cards; investable funds solutions comprising savings, money market deposit, and individual retirement accounts, as well as certificates of deposit; lending solutions consisting of residential mortgages, home equity loans and lines of credit, personal and installment loans, real estate financing, business loans, and business lines of credit; and fixed and variable annuities, and insurance products, as well as trust and investment management accounts. The Mortgage Banking segment provides residential mortgage loans for the purpose of sale in the secondary market. The company also provides transaction deposit, demand deposit, and non-interest bearing demand accounts, as well as time deposits; construction and land loans; and term loans for working capital, inventory, and general corporate use. In addition, it invests in a portfolio of securities, which include mortgage-backed securities, government-sponsored enterprise bonds, municipal obligations, and other debt securities. Waterstone Financial, Inc. operates 11 full-service banking offices, 1 drive-through office, and 11 automated teller machines located in Milwaukee, Washington, and Waukesha Counties, Wisconsin, as well as a loan production office in Minneapolis, Minnesota. The company was formerly known as Wauwatosa Holdings, Inc. and changed its name to Waterstone Financial, Inc. in August 2008. Waterstone Financial, Inc. was founded in 1921 and is based in Wauwatosa, Wisconsin.

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