Comparing Preferred Bank (NASDAQ:PFBC) & Magyar Bancorp (NASDAQ:MGYR)

Magyar Bancorp (NASDAQ:MGYR) and Preferred Bank (NASDAQ:PFBC) are both small-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, institutional ownership, risk, analyst recommendations, valuation, dividends and profitability.

Analyst Ratings

This is a summary of current ratings and price targets for Magyar Bancorp and Preferred Bank, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Magyar Bancorp	0	1	0	0	2.00
Preferred Bank	0	4	2	1	2.57

Preferred Bank has a consensus target price of $110.00, suggesting a potential upside of 4.38%. Given Preferred Bank’s stronger consensus rating and higher possible upside, analysts clearly believe Preferred Bank is more favorable than Magyar Bancorp.

Insider and Institutional Ownership

46.3% of Magyar Bancorp shares are owned by institutional investors. Comparatively, 72.8% of Preferred Bank shares are owned by institutional investors. 11.1% of Magyar Bancorp shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Valuation and Earnings

This table compares Magyar Bancorp and Preferred Bank”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Magyar Bancorp	$39.21 million	3.19	$9.76 million	$1.87	10.37
Preferred Bank	$505.97 million	3.01	$133.63 million	$10.94	9.63

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

Dividends

Magyar Bancorp pays an annual dividend of $0.40 per share and has a dividend yield of 2.1%. Preferred Bank pays an annual dividend of $3.20 per share and has a dividend yield of 3.0%. Magyar Bancorp pays out 21.4% of its earnings in the form of a dividend. Preferred Bank pays out 29.3% 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. Magyar Bancorp has increased its dividend for 3 consecutive years and Preferred Bank has increased its dividend for 5 consecutive years. Preferred Bank is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Magyar Bancorp has a beta of 0.29, meaning that its stock price is 71% less volatile than the S&P 500. Comparatively, Preferred Bank has a beta of 0.57, meaning that its stock price is 43% less volatile than the S&P 500.

Profitability

This table compares Magyar Bancorp and Preferred Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Magyar Bancorp	18.89%	9.59%	1.13%
Preferred Bank	26.54%	17.27%	1.77%

Summary

Preferred Bank beats Magyar Bancorp on 14 of the 18 factors compared between the two stocks.

About Magyar Bancorp

Magyar Bancorp, Inc. operates as the holding company for Magyar Bank that provides various consumer and commercial banking services to individuals, businesses, and nonprofit organizations in New Jersey, the United States. It accepts various deposit accounts, including demand, savings, NOW, money market, and retirement accounts, as well as certificates of deposit. The company also provides residential mortgage loans, multi-family and commercial real estate mortgage loans, home equity loans and lines of credit, commercial business loans, and construction loans, as well as small business administration loans. In addition, it offers non-deposit investment products and financial planning services, including insurance products, fixed and variable annuities, and retirement planning for individual and commercial customers; and buys, sells, and holds investment securities. The company has branch offices located in New Brunswick, North Brunswick, South Brunswick, Branchburg, Bridgewater, and Edison, New Jersey. Magyar Bancorp, Inc. was founded in 1922 and is headquartered in New Brunswick, New Jersey.

About Preferred Bank

Preferred Bank provides various commercial banking products and services to small and mid-sized businesses and their owners, entrepreneurs, real estate developers and investors, professionals, and high net worth individuals. The company accepts checking, savings, and money market deposit accounts; fixed-rate and fixed maturity retail, and non-retail certificates of deposit; and individual retirement accounts. It also provides real estate mortgage loans that are secured by retail, industrial, office, special purpose, and residential single and multi-family properties; real estate construction loans; commercial loans comprising lines of credit for working capital, term loans for capital expenditures, and commercial and stand-by letters of credit; and small business administration loans. In addition, the company offers trade finance services, including commercial and export letters of credit, import lines of credit, documentary collections, international wire transfers, acceptances/trust receipt financing products, export financing, and bills purchase programs. Further, it provides cash management services; and internet, mobile, and tablet banking services. The company operates through full-service branch offices in the California counties of Los Angeles, Orange and San Francisco; Flushing, New York; Houston suburb of Sugar Land, Texas; and a satellite office in Manhattan, New York. The company was incorporated in 1991 and is headquartered in Los Angeles, California.