United Community Banks (UCBI) & Heritage Commerce Corp (HTBK) Critical Review

United Community Banks (NASDAQ: UCBI) and Heritage Commerce Corp (NASDAQ:HTBK) are both finance companies, but which is the better stock? We will contrast the two companies based on the strength of their dividends, institutional ownership, risk, earnings, profitability, valuation and analyst recommendations.

Dividends

United Community Banks pays an annual dividend of $0.40 per share and has a dividend yield of 1.4%. Heritage Commerce Corp pays an annual dividend of $0.40 per share and has a dividend yield of 2.7%. United Community Banks pays out 27.4% of its earnings in the form of a dividend. Heritage Commerce Corp pays out 54.8% 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.

Valuation & Earnings

This table compares United Community Banks and Heritage Commerce Corp’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
United Community Banks $424.67 million 4.72 $103.63 million $1.46 19.33
Heritage Commerce Corp $104.01 million 5.37 $27.83 million $0.73 20.08

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

Analyst Ratings

This is a summary of recent ratings and recommmendations for United Community Banks and Heritage Commerce Corp, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
United Community Banks 0 2 4 1 2.86
Heritage Commerce Corp 0 1 1 0 2.50

United Community Banks currently has a consensus price target of $31.14, indicating a potential upside of 10.36%. Heritage Commerce Corp has a consensus price target of $15.50, indicating a potential upside of 5.73%. Given United Community Banks’ stronger consensus rating and higher possible upside, research analysts clearly believe United Community Banks is more favorable than Heritage Commerce Corp.

Profitability

This table compares United Community Banks and Heritage Commerce Corp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
United Community Banks 23.07% 10.42% 1.07%
Heritage Commerce Corp 25.75% 10.61% 1.07%

Institutional & Insider Ownership

86.7% of United Community Banks shares are owned by institutional investors. Comparatively, 69.5% of Heritage Commerce Corp shares are owned by institutional investors. 2.2% of United Community Banks shares are owned by company insiders. Comparatively, 5.7% of Heritage Commerce Corp shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Volatility & Risk

United Community Banks has a beta of 0.87, suggesting that its stock price is 13% less volatile than the S&P 500. Comparatively, Heritage Commerce Corp has a beta of 0.51, suggesting that its stock price is 49% less volatile than the S&P 500.

Summary

United Community Banks beats Heritage Commerce Corp on 10 of the 16 factors compared between the two stocks.

United Community Banks Company Profile

United Community Banks, Inc. (United) is a bank holding company. United conducts its operations through a community-focused operating model of separate community banks, which, as of December 31, 2016, operated at 139 locations throughout the Atlanta-Sandy Springs-Roswell, Georgia, and Gainesville, Georgia metropolitan statistical areas, upstate and coastal South Carolina, north and coastal Georgia, western North Carolina, and east Tennessee. The community banks offer a range of retail and corporate banking services, including checking, savings and time deposit accounts, secured and unsecured loans, wire transfers, brokerage services and other financial services. The Company operates through its subsidiary, United Community Bank, Blairsville, Georgia (the Bank). The Bank owns an insurance agency, United Community Insurance Services, Inc., known as United Community Advisory Services, which is a subsidiary of the Bank.

Heritage Commerce Corp Company Profile

Heritage Commerce Corp is a bank holding company. The Company, through its subsidiary Heritage Bank of Commerce (the Bank), provides a range of banking services. The Bank is a California state-chartered multi-community independent bank that offers a range of commercial banking services to small and medium-sized businesses and their owners, managers and employees. As of December 31, 2016, the Company operated through 11 service branch offices located in the southern and eastern regions of the general San Francisco Bay Area of California in the counties of Santa Clara, Alameda, Contra Costa and San Benito. The Company’s subsidiary, CSNK Working Capital Finance Corp., doing business as Bay View Funding, provides business-essential working capital factoring financing to various industries across the United States. As of December 31, 2016, the Bank operated automated teller machines (ATMs) at five different locations.

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