Analyzing First Commonwealth Financial (NYSE:FCF) and Magyar Bancorp (NASDAQ:MGYR)

First Commonwealth Financial (NYSE:FCF) and Magyar Bancorp (NASDAQ:MGYR) are both small-cap finance companies, but which is the better stock? We will compare the two companies based on the strength of their analyst recommendations, profitability, institutional ownership, risk, valuation, earnings and dividends.

Dividends

First Commonwealth Financial pays an annual dividend of $0.54 per share and has a dividend yield of 3.2%. Magyar Bancorp pays an annual dividend of $0.32 per share and has a dividend yield of 1.8%. First Commonwealth Financial pays out 41.5% of its earnings in the form of a dividend. Magyar Bancorp pays out 20.4% 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 Commonwealth Financial has increased its dividend for 9 consecutive years and Magyar Bancorp has increased its dividend for 3 consecutive years. First Commonwealth Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of current ratings for First Commonwealth Financial and Magyar Bancorp, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First Commonwealth Financial	0	2	3	0	2.60
Magyar Bancorp	0	0	0	0	0.00

First Commonwealth Financial currently has a consensus target price of $18.90, suggesting a potential upside of 12.47%. Given First Commonwealth Financial’s stronger consensus rating and higher probable upside, equities analysts plainly believe First Commonwealth Financial is more favorable than Magyar Bancorp.

Earnings and Valuation

This table compares First Commonwealth Financial and Magyar Bancorp”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First Commonwealth Financial	$490.58 million	3.58	$142.57 million	$1.30	12.93
Magyar Bancorp	$35.35 million	3.18	$7.78 million	$1.57	11.09

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

Institutional & Insider Ownership

72.6% of First Commonwealth Financial shares are held by institutional investors. Comparatively, 46.3% of Magyar Bancorp shares are held by institutional investors. 2.2% of First Commonwealth Financial shares are held by company insiders. Comparatively, 7.4% of Magyar Bancorp shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Volatility & Risk

First Commonwealth Financial has a beta of 0.84, indicating that its stock price is 16% less volatile than the S&P 500. Comparatively, Magyar Bancorp has a beta of 0.22, indicating that its stock price is 78% less volatile than the S&P 500.

Profitability

This table compares First Commonwealth Financial and Magyar Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First Commonwealth Financial	18.94%	9.71%	1.18%
Magyar Bancorp	15.12%	8.64%	0.99%

Summary

First Commonwealth Financial beats Magyar Bancorp on 14 of the 17 factors compared between the two stocks.

About First Commonwealth Financial

First Commonwealth Financial Corporation, a financial holding company, provides various consumer and commercial banking services in the United States. Its consumer services include personal checking accounts, interest-earning checking accounts, savings and health savings accounts, insured money market accounts, debit cards, investment certificates, fixed and variable rate certificates of deposit, mortgage loans, secured and unsecured installment loans, construction and real estate loans, safe deposit facilities, credit cards, credit lines with overdraft checking protection, IRA accounts, and automated teller machine (atm) services, as well as internet, mobile, and telephone banking services. The company's commercial banking services comprise commercial lending, business checking accounts, online account management services, payroll direct deposits, commercial cash management services, and repurchase agreements, as well as ACH origination services. In addition, it offers various trust and asset management services; auto, home, and business insurance, as well as term life insurance; and annuities, mutual funds, and stock and bond brokerage services through a broker-dealer and insurance brokers. The company was founded in 1934 and is headquartered in Indiana, Pennsylvania.

About Magyar Bancorp

Magyar Bancorp, Inc. operates as the holding company for Magyar Bank that provides various consumer and commercial banking services to individuals, businesses, and nonprofit organizations in New Jersey, the United States. It accepts various deposit accounts, including demand, savings, NOW, money market, and retirement accounts, as well as certificates of deposit. The company also provides residential mortgage loans, multi-family and commercial real estate mortgage loans, home equity loans and lines of credit, commercial business loans, and construction loans, as well as small business administration loans. In addition, it offers non-deposit investment products and financial planning services, including insurance products, fixed and variable annuities, and retirement planning for individual and commercial customers; and buys, sells, and holds investment securities. The company has branch offices located in New Brunswick, North Brunswick, South Brunswick, Branchburg, Bridgewater, and Edison, New Jersey. Magyar Bancorp, Inc. was founded in 1922 and is headquartered in New Brunswick, New Jersey.