Comparing First Capital (NASDAQ:FCAP) & Heritage Financial (NASDAQ:HFWA)

Heritage Financial (NASDAQ:HFWA) and First Capital (NASDAQ:FCAP) are both small-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their analyst recommendations, risk, dividends, valuation, earnings, institutional ownership and profitability.

Analyst Ratings

This is a summary of recent ratings for Heritage Financial and First Capital, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Heritage Financial	0	2	2	0	2.50
First Capital	0	0	0	0	0.00

Heritage Financial currently has a consensus price target of $27.75, indicating a potential upside of 11.67%. Given Heritage Financial’s stronger consensus rating and higher possible upside, analysts clearly believe Heritage Financial is more favorable than First Capital.

Profitability

This table compares Heritage Financial and First Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Heritage Financial	15.22%	7.34%	0.90%
First Capital	21.45%	11.23%	1.10%

Institutional & Insider Ownership

78.3% of Heritage Financial shares are owned by institutional investors. Comparatively, 11.7% of First Capital shares are owned by institutional investors. 1.8% of Heritage Financial shares are owned by company insiders. Comparatively, 4.0% of First Capital shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares Heritage Financial and First Capital”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Heritage Financial	$317.18 million	2.66	$43.26 million	$1.43	17.38
First Capital	$58.13 million	2.66	$11.94 million	$3.94	11.66

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

Dividends

Heritage Financial pays an annual dividend of $0.96 per share and has a dividend yield of 3.9%. First Capital pays an annual dividend of $1.24 per share and has a dividend yield of 2.7%. Heritage Financial pays out 67.1% of its earnings in the form of a dividend. First Capital pays out 31.5% 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. Heritage Financial has increased its dividend for 14 consecutive years and First Capital has increased its dividend for 2 consecutive years. Heritage Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Heritage Financial has a beta of 0.56, indicating that its share price is 44% less volatile than the S&P 500. Comparatively, First Capital has a beta of 0.65, indicating that its share price is 35% less volatile than the S&P 500.

Summary

Heritage Financial beats First Capital on 10 of the 17 factors compared between the two stocks.

About Heritage Financial

Heritage Financial Corporation operates as the bank holding company for Heritage Bank that provides various financial services to small and medium sized businesses and individuals in the United States. It accepts various deposit products, such as noninterest demand deposits, interest bearing demand deposits, money market accounts, savings accounts, personal checking accounts, and certificates of deposit. The company’s loan portfolio includes commercial and industrial loans, owner-occupied and non-owner occupied commercial real estate loans, one-to-four family residential loans, real estate construction and land development loans, consumer loans, commercial business loans, lines of credit, term equipment financing, and term real estate loans, as well as commercial business loans to a range of businesses in industries that include real estate and rental and leasing, healthcare, accommodation and food services, retail trade, and construction. It also originates loans that are guaranteed by the U.S. Small Business Administration; and provides objective advice from trusted advisers. The company was formerly known as Heritage Financial Corporation, M.H.C. and changed its name to Heritage Financial Corporation in 1998. Heritage Financial Corporation was founded in 1927 and is headquartered in Olympia, Washington.

About First Capital

First Capital, Inc. operates as the bank holding company for First Harrison Bank that provides various banking services to individuals and business customers. The company offers various deposit instruments, including non-interest-bearing checking accounts, negotiable order of withdrawal accounts, money market accounts, regular savings accounts, certificates of deposit, and retirement savings plans. It also provides residential mortgage loans, construction loans for residential and commercial properties, and commercial real estate loans, as well as commercial business loans. In addition, the company originates mortgage loans for sale in the secondary market and sells non-deposit investment products; and offers various secured or guaranteed consumer loans comprising automobile and truck loans, home equity loans, home improvement loans, boat loans, mobile home loans, credit cards and other personal loans, and loans secured by savings deposits, as well as unsecured consumer loans. First Capital, Inc. was founded in 1891 and is based in Corydon, Indiana.