Head-To-Head Comparison: First Business Financial Services (NASDAQ:FBIZ) versus Security Federal (OTCMKTS:SFDL)

First Business Financial Services (NASDAQ:FBIZ) and Security Federal (OTCMKTS:SFDL) are both small-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their risk, valuation, profitability, earnings, analyst recommendations, institutional ownership and dividends.

Earnings & Valuation

This table compares First Business Financial Services and Security Federal’s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First Business Financial Services	$226.24 million	1.42	$37.03 million	$4.34	8.90
Security Federal	$74.37 million	1.02	$10.19 million	$2.86	8.23

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

Dividends

First Business Financial Services pays an annual dividend of $1.00 per share and has a dividend yield of 2.6%. Security Federal pays an annual dividend of $0.56 per share and has a dividend yield of 2.4%. First Business Financial Services pays out 23.0% of its earnings in the form of a dividend. Security Federal pays out 19.6% 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. First Business Financial Services has increased its dividend for 12 consecutive years. First Business Financial Services is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of current recommendations for First Business Financial Services and Security Federal, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First Business Financial Services	0	0	2	0	3.00
Security Federal	0	0	0	0	N/A

First Business Financial Services presently has a consensus target price of $45.00, indicating a potential upside of 16.49%. Given First Business Financial Services’ higher probable upside, analysts plainly believe First Business Financial Services is more favorable than Security Federal.

Volatility and Risk

First Business Financial Services has a beta of 0.83, suggesting that its share price is 17% less volatile than the S&P 500. Comparatively, Security Federal has a beta of 0.45, suggesting that its share price is 55% less volatile than the S&P 500.

Insider and Institutional Ownership

60.1% of First Business Financial Services shares are owned by institutional investors. 6.3% of First Business Financial Services shares are owned by company insiders. Comparatively, 35.9% of Security Federal shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares First Business Financial Services and Security Federal’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First Business Financial Services	15.48%	13.51%	1.08%
Security Federal	11.73%	10.99%	0.62%

Summary

First Business Financial Services beats Security Federal on 14 of the 16 factors compared between the two stocks.

About First Business Financial Services

First Business Financial Services, Inc. operates as the bank holding company for First Business Bank that provides commercial banking products and services for small and medium-sized businesses, business owners, executives, professionals, and high net worth individuals in Wisconsin, Kansas, and Missouri. The company offers real estate lending, commercial and industrial lending, asset-based lending, accounts receivable financing, equipment financing loans and leases, floorplan financing, vendor financing, small business administration lending and servicing, treasury management solutions, and company retirement services. It also provides private wealth management for individuals, including creating and executing asset allocation strategies, trust and estate administration, financial planning, investment management, and access to brokerage and custody-only services. In addition, the company offers bank consulting consisting of investment portfolio administrative and asset liability management services, and commercial deposit accounts. The company was founded in 1909 and is headquartered in Madison, Wisconsin.

About Security Federal

Security Federal Corporation operates as the bank holding company for Security Federal Bank that provides various banking products and services. It offers various deposit products, such as savings and checking accounts, money market accounts, fixed interest rate certificates with varying maturities, and individual retirement accounts. The company provides real estate loans comprising commercial real estate loans secured by non-residential commercial properties, churches, hotels, residential developments, and multi-family dwellings; one-to-four family residential real estate loans; and construction loans and loans for the acquisition, development, and construction of residential subdivisions and commercial projects. In addition, it offers commercial and agricultural business loans secured by business equipment, furniture and fixtures, inventory, and receivables, or unsecured; and consumer loans including home improvements, residential lots, mortgage, automobiles, boats, mobile homes, recreational vehicles, and education. The company offers trust, financial planning, and financial management services; and insurance agency services, such as auto, business, and home insurance. Additionally, it invests in various types of liquid assets, including U.S. Treasury obligations and securities of various federal agencies, certificates of deposit at insured institutions, mutual funds, bankers' acceptances, and federal funds, as well as commercial paper and corporate debt securities. It through branch offices in Aiken, Lexington, Richland and Saluda counties in South Carolina and Columbia; and Richmond counties in Georgia. Security Federal Corporation was founded in 1922 and is headquartered in Aiken, South Carolina.