Critical Comparison: UMB Financial (NASDAQ:UMBF) versus Prosperity Bancshares (NYSE:PB)

Prosperity Bancshares (NYSE:PB) and UMB Financial (NASDAQ:UMBF) are both finance companies, but which is the better stock? We will contrast the two companies based on the strength of their institutional ownership, analyst recommendations, earnings, dividends, profitability, valuation and risk.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Prosperity Bancshares and UMB Financial, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Prosperity Bancshares	1	8	5	0	2.29
UMB Financial	0	3	11	1	2.87

Prosperity Bancshares currently has a consensus target price of $78.36, indicating a potential upside of 8.32%. UMB Financial has a consensus target price of $166.54, indicating a potential upside of 16.59%. Given UMB Financial’s stronger consensus rating and higher possible upside, analysts clearly believe UMB Financial is more favorable than Prosperity Bancshares.

Insider and Institutional Ownership

80.7% of Prosperity Bancshares shares are held by institutional investors. Comparatively, 87.8% of UMB Financial shares are held by institutional investors. 4.0% of Prosperity Bancshares shares are held by insiders. Comparatively, 5.3% of UMB Financial shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Valuation and Earnings

This table compares Prosperity Bancshares and UMB Financial”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Prosperity Bancshares	$1.74 billion	4.20	$542.84 million	$5.77	12.54
UMB Financial	$2.69 billion	4.03	$702.40 million	$12.01	11.89

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

Profitability

This table compares Prosperity Bancshares and UMB Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Prosperity Bancshares	29.95%	7.39%	1.43%
UMB Financial	21.64%	13.41%	1.38%

Dividends

Prosperity Bancshares pays an annual dividend of $2.40 per share and has a dividend yield of 3.3%. UMB Financial pays an annual dividend of $2.00 per share and has a dividend yield of 1.4%. Prosperity Bancshares pays out 41.6% of its earnings in the form of a dividend. UMB Financial pays out 16.7% 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. Prosperity Bancshares has increased its dividend for 27 consecutive years and UMB Financial has increased its dividend for 32 consecutive years.

Risk and Volatility

Prosperity Bancshares has a beta of 0.63, indicating that its stock price is 37% less volatile than the S&P 500. Comparatively, UMB Financial has a beta of 0.77, indicating that its stock price is 23% less volatile than the S&P 500.

Summary

UMB Financial beats Prosperity Bancshares on 13 of the 18 factors compared between the two stocks.

About Prosperity Bancshares

Prosperity Bancshares, Inc. operates as bank holding company for the Prosperity Bank that provides financial products and services to businesses and consumers. It accepts various deposit products, such as demand, savings, money market, and time accounts, as well as and certificates of deposit. The company also offers 1-4 family residential mortgage, commercial real estate and multifamily residential, commercial and industrial, agricultural, and non-real estate agricultural loans, as well as construction, land development, and other land loans; consumer loans, including automobile, recreational vehicle, boat, home improvement, personal, and deposit account collateralized loans; term loans and lines of credit; and consumer durables and home equity loans, as well as loans for working capital, business expansion, and purchase of equipment and machinery. In addition, it provides internet banking, mobile banking, trust and wealth management, retail brokerage, mortgage services, and treasury management, as well as debit and credit cards. The company was incorporated in 1983 and is headquartered in Houston, Texas.

About UMB Financial

UMB Financial Corporation operates as the bank holding company that provides banking services and asset servicing in the United States and internationally. The Commercial Banking segment provides commercial loans and credit card; commercial real estate financing; letters of credit; loan syndication, and consultative service; various business solutions including asset-based lending, mezzanine debt, and minority equity investment; and treasury management service, such as depository service, account reconciliation, cash management tool, accounts payable and receivable solution, electronic fund transfer and automated payment, controlled disbursement, lockbox service, and remote deposit capture service. The Institutional Banking segment offers fund, asset management, and healthcare service to institutional clients; and fund administration and accounting, investor service and transfer agency, mutual fund service, alternative investment service, fixed income sale, trading and underwriting, and corporate trust and escrow service, as well as institutional custody service. This segment also provides healthcare payment solution includes custodial service for health saving accounts and private label, multipurpose debit cards to insurance carriers, third-party administrator, software companies, employers, and financial institutions. The Personal Banking segment offers deposit account, retail credit card, private banking, installment loan, home equity line of credit, residential mortgage, as well as internet banking, ATM network, private banking, brokerage and insurance service, and investment advisory, custody, and trust services. It operates through a network of branches and offices. The company was founded in 1913 and is headquartered in Kansas City, Missouri.