Contrasting Capstar Financial (CSTR) and ServisFirst Bancshares (SFBS)

Capstar Financial (NASDAQ:CSTR) and ServisFirst Bancshares (NASDAQ:SFBS) are both small-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, risk, institutional ownership, valuation, analyst recommendations, dividends and profitability.

Analyst Recommendations

This is a summary of current ratings for Capstar Financial and ServisFirst Bancshares, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capstar Financial 0 2 2 0 2.50
ServisFirst Bancshares 0 2 1 0 2.33

Capstar Financial currently has a consensus target price of $18.25, suggesting a potential upside of 17.74%. ServisFirst Bancshares has a consensus target price of $44.00, suggesting a potential upside of 18.82%. Given ServisFirst Bancshares’ higher probable upside, analysts clearly believe ServisFirst Bancshares is more favorable than Capstar Financial.

Dividends

Capstar Financial pays an annual dividend of $0.16 per share and has a dividend yield of 1.0%. ServisFirst Bancshares pays an annual dividend of $0.44 per share and has a dividend yield of 1.2%. Capstar Financial pays out 40.0% of its earnings in the form of a dividend. ServisFirst Bancshares pays out 24.7% 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. ServisFirst Bancshares has increased its dividend for 3 consecutive years. ServisFirst Bancshares is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares Capstar Financial and ServisFirst Bancshares’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Capstar Financial $62.42 million 2.94 $1.50 million $0.40 38.75
ServisFirst Bancshares $281.80 million 7.00 $93.09 million $1.78 20.80

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

Profitability

This table compares Capstar Financial and ServisFirst Bancshares’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Capstar Financial 14.98% 9.86% 1.07%
ServisFirst Bancshares 37.00% 19.45% 1.74%

Risk and Volatility

Capstar Financial has a beta of 0.85, meaning that its share price is 15% less volatile than the S&P 500. Comparatively, ServisFirst Bancshares has a beta of 1.26, meaning that its share price is 26% more volatile than the S&P 500.

Institutional & Insider Ownership

35.3% of Capstar Financial shares are owned by institutional investors. Comparatively, 45.5% of ServisFirst Bancshares shares are owned by institutional investors. 18.3% of Capstar Financial shares are owned by company insiders. Comparatively, 13.6% of ServisFirst Bancshares shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Summary

ServisFirst Bancshares beats Capstar Financial on 13 of the 17 factors compared between the two stocks.

Capstar Financial Company Profile

CapStar Financial Holdings, Inc. operates as the holding company for CapStar Bank that provides commercial banking services to consumer and corporate customers located primarily in Davidson, Sumner, Williamson, and the surrounding counties in Tennessee, the United States. It offers a range of deposit products and services, including demand deposits, interest-bearing transaction accounts, money market accounts, time and savings deposits, certificates of deposit, and CDARS reciprocal products. The company also provides commercial and consumer real estate, construction and land development, commercial and industrial, consumer, and other loans. In addition, it offers private banking and wealth management services for the owners and operators of business clients and other high net worth individuals; and correspondent banking services to community banks. Further, the company provides telephone and online banking, direct deposit, mobile banking, remote deposit, and cash management services, as well as safe deposit boxes for individuals, and small and medium sized businesses. CapStar Financial Holdings, Inc. was founded in 2007 and is headquartered in Nashville, Tennessee.

ServisFirst Bancshares Company Profile

ServisFirst Bancshares, Inc. operates as the bank holding company for ServisFirst Bank that provides banking services to individual and corporate customers in the United States. It offers demand, time, savings, and other deposits; checking, money market, and IRA accounts; and various certificates of deposit. The company also provides commercial lending products, such as seasonal loans, bridge loans, and term loans for working capital, expansion of the business, or acquisition of property, plant, and equipment, as well as commercial lines of credit; commercial real estate loans, construction and development loans, and residential real estate loans; and consumer loans, such as home equity loans, vehicle financing, loans secured by deposits, and secured and unsecured personal loans. In addition, it offers other banking products and services comprising telephone and mobile banking, direct deposit, Internet banking, traveler's checks, safe deposit boxes, attorney trust accounts, automatic account transfers, automated teller machines, and debit card systems, as well as Visa credit cards; treasury and cash management services; wire transfer, night depository, banking-by-mail, and remote capture services; and correspondent banking services to other financial institutions. Further, the company, through its subsidiary, SF Intermediate Holding Company, Inc., operates as a real estate investment trust for the United States income tax purposes; and holds and manages participations in residential mortgages and commercial real estate loans originated by ServisFirst Bank in Alabama, Florida, Georgia, and Tennessee. It operates 20 full-service banking offices located in Jefferson, Shelby, Madison, Montgomery, Mobile, and Houston Counties in Alabama; Escambia and Hillsborough Counties in Florida; Cobb and Douglas Counties in Georgia; Charleston County in South Carolina; and Davidson County in Tennessee. The company was founded in 2005 and is headquartered in Birmingham, Alabama.

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