Orrstown Financial Services (NASDAQ: ORRF) and Heritage Financial Group (NASDAQ:HBOS) are both small-cap commercial banks companies, but which is the better investment? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, earnings, profitability, dividends, risk and institutional ownership.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Orrstown Financial Services and Heritage Financial Group, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Orrstown Financial Services 0 1 1 0 2.50
Heritage Financial Group 0 0 0 0 N/A

Orrstown Financial Services currently has a consensus price target of $28.00, suggesting a potential upside of 10.89%. Given Orrstown Financial Services’ higher probable upside, research analysts plainly believe Orrstown Financial Services is more favorable than Heritage Financial Group.

Volatility & Risk

Orrstown Financial Services has a beta of 0.68, suggesting that its stock price is 32% less volatile than the S&P 500. Comparatively, Heritage Financial Group has a beta of 0.66, suggesting that its stock price is 34% less volatile than the S&P 500.

Profitability

This table compares Orrstown Financial Services and Heritage Financial Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Orrstown Financial Services 14.58% 7.23% 0.69%
Heritage Financial Group 12.90% 9.62% 0.89%

Institutional and Insider Ownership

38.0% of Orrstown Financial Services shares are owned by institutional investors. 5.4% of Orrstown Financial Services shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Dividends

Orrstown Financial Services pays an annual dividend of $0.40 per share and has a dividend yield of 1.6%. Heritage Financial Group does not pay a dividend. Orrstown Financial Services pays out 32.8% of its earnings in the form of a dividend.

Valuation & Earnings

This table compares Orrstown Financial Services and Heritage Financial Group’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Orrstown Financial Services $61.70 million 3.41 $6.62 million $1.22 20.70
Heritage Financial Group N/A N/A N/A $1.19 25.36

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

Summary

Orrstown Financial Services beats Heritage Financial Group on 9 of the 12 factors compared between the two stocks.

Orrstown Financial Services Company Profile

Orrstown Financial Services, Inc. is the bank holding company for Orrstown Bank (the Bank). The Bank is engaged in commercial banking and trust business. The Company operates through Community Banking segment. The Bank’s activities involve accepting demand, time and savings deposits, and granting loans. The Bank grants commercial, residential, consumer and agribusiness loans in its market areas of Cumberland, Franklin, Lancaster and Perry Counties in Pennsylvania and in Washington County, Maryland. The Company’s securities available for sale include debt and equity instruments. Through its trust department, the Bank renders services as trustee, executor, administrator, managing agent, custodian, investment advisor and other fiduciary activities authorized by law under the trade name, Orrstown Financial Advisors (OFA). OFA offers retail brokerage services through a third-party broker or dealer arrangement with Cetera Advisor Networks LLC.

Heritage Financial Group Company Profile

Heritage Financial Group, Inc. (Heritage) is a bank holding company. Heritage conducts commercial banking, retail banking, mortgage banking and wealth management activities through its wholly owned subsidiary, HeritageBank of the South (the Bank). As of December 31, 2014, the Bank operated in Georgia, Florida and Alabama through 36 banking locations, 21 mortgage offices, and 5 investment offices. The Bank provides credit based products, deposit accounts, corporate cash management, investment support and other services to commercial and retail clients. As of December 31, 2014, the Company had total assets of $1.7 billion. The Company offers various types of loans, including, residential real estate loans; commercial real estate loans; construction and land loans; commercial and industrial loans, and consumer and other loans.

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