Comparing Preferred Bank (NASDAQ:PFBC) and Malaga Financial (OTCMKTS:MLGF)

Preferred Bank (NASDAQ:PFBC) and Malaga Financial (OTCMKTS:MLGF) 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, institutional ownership, valuation, profitability, dividends, risk and earnings.

Insider & Institutional Ownership

72.8% of Preferred Bank shares are owned by institutional investors. Comparatively, 1.1% of Malaga Financial shares are owned by institutional investors. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Preferred Bank and Malaga Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Preferred Bank	25.67%	16.91%	1.82%
Malaga Financial	N/A	N/A	N/A

Risk & Volatility

Preferred Bank has a beta of 0.73, meaning that its stock price is 27% less volatile than the S&P 500. Comparatively, Malaga Financial has a beta of 0.15, meaning that its stock price is 85% less volatile than the S&P 500.

Dividends

Preferred Bank pays an annual dividend of $3.00 per share and has a dividend yield of 3.3%. Malaga Financial pays an annual dividend of $1.00 per share and has a dividend yield of 4.6%. Preferred Bank pays out 30.5% of its earnings in the form of a dividend. Malaga Financial pays out 43.5% 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. Preferred Bank has raised its dividend for 5 consecutive years.

Analyst Ratings

This is a breakdown of current ratings and target prices for Preferred Bank and Malaga Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Preferred Bank	0	2	2	1	2.80
Malaga Financial	0	0	0	0	0.00

Preferred Bank currently has a consensus price target of $104.67, suggesting a potential upside of 14.29%. Given Preferred Bank’s stronger consensus rating and higher probable upside, research analysts plainly believe Preferred Bank is more favorable than Malaga Financial.

Earnings & Valuation

This table compares Preferred Bank and Malaga Financial”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Preferred Bank	$280.18 million	4.72	$130.66 million	$9.84	9.31
Malaga Financial	N/A	N/A	$22.65 million	$2.30	9.50

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

Summary

Preferred Bank beats Malaga Financial on 14 of the 16 factors compared between the two stocks.

About Preferred Bank

Preferred Bank provides various commercial banking products and services to small and mid-sized businesses and their owners, entrepreneurs, real estate developers and investors, professionals, and high net worth individuals. The company accepts checking, savings, and money market deposit accounts; fixed-rate and fixed maturity retail, and non-retail certificates of deposit; and individual retirement accounts. It also provides real estate mortgage loans that are secured by retail, industrial, office, special purpose, and residential single and multi-family properties; real estate construction loans; commercial loans comprising lines of credit for working capital, term loans for capital expenditures, and commercial and stand-by letters of credit; and small business administration loans. In addition, the company offers trade finance services, including commercial and export letters of credit, import lines of credit, documentary collections, international wire transfers, acceptances/trust receipt financing products, export financing, and bills purchase programs. Further, it provides cash management services; and internet, mobile, and tablet banking services. The company operates through full-service branch offices in the California counties of Los Angeles, Orange and San Francisco; Flushing, New York; Houston suburb of Sugar Land, Texas; and a satellite office in Manhattan, New York. The company was incorporated in 1991 and is headquartered in Los Angeles, California.

About Malaga Financial

Malaga Financial Corporation operates as the holding company for Malaga Bank that provides various community banking products and services to personal and business customers. It offers checking, savings, NOW, and money market accounts, certificates of deposits, business banking, consumer, and demand deposits. The company also provides commercial real estate, single and multi-family residential mortgage, consumer, 14-unit investment property, construction, personal, and business loans; home equity lines of credit; and certificates of deposit. In addition, it offers coupon redemption, direct deposit, overdraft lines of credit, telephone transfers, U.S. savings bond redemption, and wire transfer services; and ATM and VISA debit cards, bank by mail, medallion signature guarantee, night depository, notary, safe deposit boxes, and trust deed note collection services. Further, the company provides online banking services, including bill payer, e-statements, and mobile banking services. The company was incorporated in 2002 and is headquartered in Palos Verdes Estates, California.