Analyzing Broadway Financial (NASDAQ:BYFC) and Preferred Bank (NASDAQ:PFBC)

Preferred Bank (NASDAQ:PFBC) and Broadway Financial (NASDAQ:BYFC) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, risk, analyst recommendations, institutional ownership, profitability, valuation and earnings.

Valuation and Earnings

This table compares Preferred Bank and Broadway Financial”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Preferred Bank	$505.97 million	2.94	$133.63 million	$10.94	9.42
Broadway Financial	$63.03 million	1.72	-$24.80 million	($2.71)	-4.32

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Preferred Bank	26.54%	17.27%	1.77%
Broadway Financial	-29.36%	3.49%	0.28%

Volatility & Risk

Preferred Bank has a beta of 0.57, suggesting that its share price is 43% less volatile than the S&P 500. Comparatively, Broadway Financial has a beta of 0.75, suggesting that its share price is 25% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current recommendations for Preferred Bank and Broadway Financial, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Preferred Bank	0	5	2	1	2.50
Broadway Financial	1	0	0	0	1.00

Preferred Bank currently has a consensus target price of $108.50, indicating a potential upside of 5.31%. Given Preferred Bank’s stronger consensus rating and higher possible upside, analysts plainly believe Preferred Bank is more favorable than Broadway Financial.

Insider & Institutional Ownership

72.8% of Preferred Bank shares are held by institutional investors. Comparatively, 12.1% of Broadway Financial shares are held by institutional investors. 3.0% of Broadway Financial shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Summary

Preferred Bank beats Broadway Financial on 13 of the 15 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 Broadway Financial

Broadway Financial Corporation operates as the holding company for City First Bank, National Association that provides various banking products and services in the United States. It accepts various deposit accounts, including savings accounts, checking accounts, interest checking accounts, money market accounts, and fixed-term certificates of deposit. The company also offers mortgage loans, which are secured by multi-family residential properties; single family residential properties; and commercial real estate, including charter schools, community facilities, and churches, as well as commercial business, construction, and consumer loans. In addition, it invests in securities issued by federal government agencies, residential mortgage-backed securities, and other investments. The company was founded in 1946 and is headquartered in Los Angeles, California.