Financial Analysis: South Plains Financial (NASDAQ:SPFI) versus City (NASDAQ:CHCO)

City (NASDAQ:CHCO) and South Plains Financial (NASDAQ:SPFI) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, profitability, risk, analyst recommendations, institutional ownership, dividends and earnings.

Dividends

City pays an annual dividend of $3.48 per share and has a dividend yield of 2.8%. South Plains Financial pays an annual dividend of $0.64 per share and has a dividend yield of 1.7%. City pays out 40.0% of its earnings in the form of a dividend. South Plains Financial pays out 18.3% 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. City has increased its dividend for 6 consecutive years and South Plains Financial has increased its dividend for 5 consecutive years. City is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares City and South Plains Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
City	32.33%	16.66%	1.93%
South Plains Financial	20.09%	13.16%	1.37%

Earnings & Valuation

This table compares City and South Plains Financial”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
City	$297.16 million	5.95	$117.10 million	$8.70	14.10
South Plains Financial	$288.97 million	2.15	$49.72 million	$3.50	10.91

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

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for City and South Plains Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
City	0	5	1	0	2.17
South Plains Financial	0	2	4	0	2.67

City presently has a consensus target price of $133.25, indicating a potential upside of 8.65%. South Plains Financial has a consensus target price of $44.00, indicating a potential upside of 15.21%. Given South Plains Financial’s stronger consensus rating and higher probable upside, analysts plainly believe South Plains Financial is more favorable than City.

Institutional & Insider Ownership

72.4% of City shares are owned by institutional investors. Comparatively, 55.0% of South Plains Financial shares are owned by institutional investors. 1.9% of City shares are owned by company insiders. Comparatively, 25.4% of South Plains Financial shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Risk and Volatility

City has a beta of 0.54, indicating that its share price is 46% less volatile than the S&P 500. Comparatively, South Plains Financial has a beta of 0.71, indicating that its share price is 29% less volatile than the S&P 500.

Summary

City beats South Plains Financial on 11 of the 17 factors compared between the two stocks.

About City

City Holding Company operates as a holding company for City National Bank of West Virginia that provides various banking, trust, and investment management, and other financial solutions in the United States. The company offers checking, savings, and money market accounts, as well as certificates of deposit and individual retirement accounts. It also provides commercial and industrial loans that consist of loans to corporate and other legal entity borrowers primarily in small to mid-size industrial and commercial companies; commercial real estate loans comprising commercial mortgages, which are secured by nonresidential and multi-family residential properties; residential real estate loans to consumers for the purchase or refinance of residence; first-priority home equity loans; home equity lines of credit; amortized home equity loans; consumer loans that are secured and unsecured by automobiles, boats, recreational vehicles, certificates of deposit, and other personal property; and demand deposit account overdrafts, as well as owner-occupied real estate and construction, land development, and lines of credit. In addition, the company offers mortgage banking services, including fixed and adjustable-rate mortgages, construction financing, land loans, production of conventional and government-insured mortgages, secondary marketing, and mortgage servicing. Further, it provides deposit services for commercial customers comprising treasury management, lockbox, and other cash management services; merchant credit card services; wealth management, trust, investment, and custodial services for commercial and individual customers; and corporate trust and institutional custody, financial and estate planning, and retirement plan services, as well as automated-teller-machine, interactive-teller-machine, mobile banking, interactive voice response systems, and credit and debit card services. City Holding Company was founded in 1957 and is headquartered in Charleston, West Virginia.

About South Plains Financial

South Plains Financial, Inc. operates as a bank holding company for City Bank that provides commercial and consumer financial services to small and medium-sized businesses and individuals. The company operates through two segments, Banking and Insurance. It offers deposit products, including demand deposit accounts, interest-bearing products, savings accounts, and certificate of deposits. The company also provides commercial real estate loans; general and specialized commercial loans, including agricultural production and real estate, energy, finance, investment, and insurance loans, as well as loans to goods, services, restaurant and retail, construction, and other industries; residential construction loans; and 1-4 family residential loans, auto loans, and other loans for recreational vehicles or other purposes. In addition, it offers crop insurance products; trust products and services; investment services; mortgage banking services; online and mobile banking services; and debit and credit cards. The company was founded in 1941 and is headquartered in Lubbock, Texas.