Contrasting Cathay General Bancorp (NASDAQ:CATY) & Heritage Commerce (NASDAQ:HTBK)

Cathay General Bancorp (NASDAQ:CATY) and Heritage Commerce (NASDAQ:HTBK) are both finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their earnings, risk, institutional ownership, profitability, analyst recommendations, valuation and dividends.

Profitability

This table compares Cathay General Bancorp and Heritage Commerce’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Cathay General Bancorp	23.79%	11.37%	1.38%
Heritage Commerce	17.77%	8.07%	1.01%

Institutional and Insider Ownership

75.0% of Cathay General Bancorp shares are owned by institutional investors. Comparatively, 75.6% of Heritage Commerce shares are owned by institutional investors. 4.5% of Cathay General Bancorp shares are owned by insiders. Comparatively, 2.7% of Heritage Commerce shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Cathay General Bancorp and Heritage Commerce”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Cathay General Bancorp	$1.38 billion	2.92	$315.12 million	$4.85	12.43
Heritage Commerce	$197.46 million	4.20	$47.83 million	$0.78	17.24

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

Volatility and Risk

Cathay General Bancorp has a beta of 0.86, indicating that its share price is 14% less volatile than the S&P 500. Comparatively, Heritage Commerce has a beta of 0.69, indicating that its share price is 31% less volatile than the S&P 500.

Dividends

Cathay General Bancorp pays an annual dividend of $1.52 per share and has a dividend yield of 2.5%. Heritage Commerce pays an annual dividend of $0.52 per share and has a dividend yield of 3.9%. Cathay General Bancorp pays out 31.3% of its earnings in the form of a dividend. Heritage Commerce pays out 66.7% 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 Ratings

This is a summary of current ratings and recommmendations for Cathay General Bancorp and Heritage Commerce, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Cathay General Bancorp	1	3	1	0	2.00
Heritage Commerce	0	5	2	0	2.29

Cathay General Bancorp currently has a consensus price target of $51.75, indicating a potential downside of 14.18%. Heritage Commerce has a consensus price target of $13.13, indicating a potential downside of 2.42%. Given Heritage Commerce’s stronger consensus rating and higher possible upside, analysts plainly believe Heritage Commerce is more favorable than Cathay General Bancorp.

Summary

Cathay General Bancorp beats Heritage Commerce on 9 of the 16 factors compared between the two stocks.

About Cathay General Bancorp

Cathay General Bancorp operates as the holding company for Cathay Bank that offers various commercial banking products and services to individuals, professionals, and small to medium-sized businesses in the United States. The company offers various deposit products, including passbook accounts, checking accounts, money market deposit accounts, certificates of deposit, individual retirement accounts, and public funds deposits. It also provides loan products, such as commercial mortgage loans, commercial loans, small business administration loans, residential mortgage loans, real estate construction loans, and home equity lines of credit, as well as installment loans to individuals for household, and other consumer expenditures. In addition, the company offers trade financing, letter of credit, wire transfer, forward currency spot and forward contract, safe deposit, collection, automatic teller machine, Internet banking, investment, and other customary bank services, as well as securities and insurance products. Cathay General Bancorp was founded in 1962 and is headquartered in Los Angeles, California.

About Heritage Commerce

Heritage Commerce Corp operates as the bank holding company for Heritage Bank of Commerce that provides various commercial and personal banking services to residents and the business/professional community in California. Its deposit products for business banking and retail markets include interest and non-interest-bearing demand, savings, and money market accounts, as well as certificates of deposit and time deposits. The company’s loan portfolio comprises commercial loans, such as operating secured and unsecured loans advanced for working capital, equipment purchases, and other business purposes; commercial real estate loans; commercial construction loans for rental properties, commercial buildings, and homes; small business administration loans; home equity lines of credit; multifamily loans on residential properties; residential mortgage loans; and consumer loans consisting of loans for financing automobiles, various consumer goods, and other personal purposes. In addition, it offers other banking services, including cashier’s checks, bank by mail, night depositories, safe deposit boxes, direct deposit, automated payroll, electronic funds transfer, online bill pay, homeowner association, remote deposit capture, automated clearing house origination, electronic data interchange, and check imaging services, as well as other customary banking, factoring financing, and electronic banking services. Heritage Commerce Corp was founded in 1994 and is headquartered in San Jose, California.