Contrasting Investar (NASDAQ:ISTR) and First Foundation (NASDAQ:FFWM)

Investar (NASDAQ:ISTRGet Rating) and First Foundation (NASDAQ:FFWMGet Rating) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their valuation, earnings, risk, profitability, analyst recommendations, institutional ownership and dividends.

Dividends

Investar pays an annual dividend of $0.34 per share and has a dividend yield of 1.6%. First Foundation pays an annual dividend of $0.44 per share and has a dividend yield of 2.1%. Investar pays out 27.9% of its earnings in the form of a dividend. First Foundation pays out 17.8% 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. Investar has increased its dividend for 8 consecutive years and First Foundation has increased its dividend for 3 consecutive years. First Foundation is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Investar and First Foundation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Investar 11.38% 3.10% 0.29%
First Foundation 34.58% 12.94% 1.30%

Institutional & Insider Ownership

56.7% of Investar shares are held by institutional investors. Comparatively, 60.5% of First Foundation shares are held by institutional investors. 10.3% of Investar shares are held by insiders. Comparatively, 13.9% of First Foundation shares are held by 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.

Valuation and Earnings

This table compares Investar and First Foundation’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Investar $107.58 million 2.07 $8.00 million $1.22 17.73
First Foundation $317.67 million 3.66 $109.51 million $2.47 8.32

First Foundation has higher revenue and earnings than Investar. First Foundation is trading at a lower price-to-earnings ratio than Investar, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Investar has a beta of 0.51, meaning that its share price is 49% less volatile than the S&P 500. Comparatively, First Foundation has a beta of 1.22, meaning that its share price is 22% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Investar and First Foundation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Investar 0 1 0 0 2.00
First Foundation 0 0 3 0 3.00

Investar presently has a consensus price target of $20.00, suggesting a potential downside of 7.54%. First Foundation has a consensus price target of $31.00, suggesting a potential upside of 50.85%. Given First Foundation’s stronger consensus rating and higher probable upside, analysts clearly believe First Foundation is more favorable than Investar.

Summary

First Foundation beats Investar on 15 of the 17 factors compared between the two stocks.

Investar Company Profile (Get Rating)

Investar Holding Corporation operates as the bank holding company for Investar Bank that provides a range of commercial banking products to individuals and small to medium-sized businesses in South Louisiana. The company offers various deposit products and services, such as savings, checking, money market, and individual retirement accounts, as well as various certificates of deposit; debit cards; and mobile banking services. It also provides commercial real estate loans; commercial and industrial loans, including working capital lines of credit and equipment loans; loans for the construction of commercial projects, and single family residential and multifamily properties; one-to-four family residential real estate lending, such as second mortgage loans; consumer loans, such as secured and unsecured installment and term loans, home equity loans and lines of credit, and auto loans, as well as loans for personal, family, and household purposes. In addition, the company offers cash management products, including remote deposit capture, lockbox payment processing, virtual vault, electronic statements, positive pay, ACH origination and wire transfer, investment sweep accounts, and business Internet banking services. Further, it provides various other banking services, such as cashiers' checks, direct deposit of payroll and social security checks, night depository, bank-by-mail, automated teller machine, interactive teller machines, merchant card, and mobile wallet payment services. The company operates through a network of 33 full service branches. Investar Holding Corporation was founded in 2006 and is headquartered in Baton Rouge, Louisiana.

First Foundation Company Profile (Get Rating)

First Foundation Inc., through its subsidiaries, provides personal banking, business banking, and private wealth management services in the United States. It operates through two segments, Banking and Wealth Management. The company offers a range of bank deposit products, including personal and business checking accounts, savings accounts, interest-bearing negotiable order of withdrawal accounts, money market accounts, and time certificate of deposits; and loan products consisting of multifamily and single family residential real estate loans, commercial real estate loans, and commercial term loans and line of credits, as well as consumer loans, such as personal installment loans and line of credits, and home equity line of credits. It also provides various specialized services comprising trust services, internet and mobile banking, remote deposit capture services, merchant credit card services, ATM cards, Visa debit cards, and business sweep accounts, as well as insurance brokerage services and equipment financing solutions. In addition, the company offers investment management and financial planning services; treasury management services; advisory and coordination services in the areas of estate planning, retirement planning, and charitable and business ownership issues; and financial, investment, and economic advisory and related services. Further, it provides support services, including the processing and transmission of financial and economic data for charitable organizations. The company operates through a network of 28 branch offices and 3 loan production offices in California, Nevada, Texas, and Hawaii. First Foundation Inc. was founded in 1985 and is headquartered in Dallas, Texas.

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