Critical Analysis: Peoples Financial Services (NASDAQ:PFIS) vs. First Business Financial Services (NASDAQ:FBIZ)

Peoples Financial Services (NASDAQ:PFIS) and First Business Financial Services (NASDAQ:FBIZ) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their risk, valuation, earnings, dividends, institutional ownership, profitability and analyst recommendations.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Peoples Financial Services	20.66%	17.27%	1.70%
First Business Financial Services	19.28%	14.92%	1.29%

Insider and Institutional Ownership

31.7% of Peoples Financial Services shares are held by institutional investors. Comparatively, 60.1% of First Business Financial Services shares are held by institutional investors. 8.2% of Peoples Financial Services shares are held by insiders. Comparatively, 5.0% of First Business Financial Services shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Earnings and Valuation

This table compares Peoples Financial Services and First Business Financial Services”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Peoples Financial Services	$283.67 million	2.46	$59.19 million	$8.83	7.90
First Business Financial Services	$279.25 million	2.11	$50.32 million	$6.56	10.71

Peoples Financial Services has higher revenue and earnings than First Business Financial Services. Peoples Financial Services 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.

Analyst Ratings

This is a summary of current ratings and price targets for Peoples Financial Services and First Business Financial Services, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Peoples Financial Services	0	2	1	0	2.33
First Business Financial Services	0	0	3	1	3.25

Peoples Financial Services currently has a consensus target price of $65.50, suggesting a potential downside of 6.07%. First Business Financial Services has a consensus target price of $75.50, suggesting a potential upside of 7.49%. Given First Business Financial Services’ stronger consensus rating and higher possible upside, analysts clearly believe First Business Financial Services is more favorable than Peoples Financial Services.

Dividends

Peoples Financial Services pays an annual dividend of $2.50 per share and has a dividend yield of 3.6%. First Business Financial Services pays an annual dividend of $1.36 per share and has a dividend yield of 1.9%. Peoples Financial Services pays out 28.3% of its earnings in the form of a dividend. First Business Financial Services pays out 20.7% 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. Peoples Financial Services has raised its dividend for 8 consecutive years and First Business Financial Services has raised its dividend for 13 consecutive years.

Volatility & Risk

Peoples Financial Services has a beta of 0.74, meaning that its share price is 26% less volatile than the S&P 500. Comparatively, First Business Financial Services has a beta of 0.65, meaning that its share price is 35% less volatile than the S&P 500.

Summary

Peoples Financial Services beats First Business Financial Services on 10 of the 18 factors compared between the two stocks.

About Peoples Financial Services

Peoples Financial Services Corp. operates as the bank holding company for Peoples Security Bank and Trust Company that provides various commercial and retail banking services. The company accepts money market, negotiable order of withdrawal, savings, individual retirement, demand deposit, and certificates of deposit accounts. It also provides residential real estate, automobile, manufactured housing, personal, and home equity loans; and commercial real estate, working capital, construction, small business administration, and agricultural loans, as well as loans for equipment and other commercial needs, and mineral rights. In addition, the company offers fiduciary and investment services; investment management, IRA trustee, estate administration, living and life insurance trust, trustee under will, guardianship, custodial/IRA custodial, and corporate trust services, as well as pension and profit-sharing plans. Further, it provides wealth management products and services comprising investment portfolio management, estate and business succession planning, annuities, insurance, retirement plan, and tax planning, as well as education funding strategies; and securities, brokerage, and investor services. Additionally, the company offers small business checking and merchant money market accounts, online and telephone banking, business credit cards, merchant line of credit, and financial checkup services; and remote deposit capture, automatic clearing house transaction, cash management, automated teller machine, point of sale transaction, safe deposit box, night depository, direct deposit, and official check services. It serves business, non-profit, governmental, municipal agency, and professional customers, as well as retail customers. Peoples Financial Services Corp. was founded in 1905 and is headquartered in Scranton, Pennsylvania.

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.