First Business Financial Services (NASDAQ: FBIZ) and First Republic Bank (NYSE:FRC) are both financials companies, but which is the superior business? We will contrast the two businesses based on the strength of their analyst recommendations, dividends, institutional ownership, earnings, profitability, valuation and risk.

Volatility and Risk

First Business Financial Services has a beta of 0.97, indicating that its stock price is 3% less volatile than the S&P 500. Comparatively, First Republic Bank has a beta of 0.96, indicating that its stock price is 4% less volatile than the S&P 500.

Profitability

This table compares First Business Financial Services and First Republic Bank’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
First Business Financial Services 12.63% 7.20% 0.66%
First Republic Bank 26.85% 12.06% 0.94%

Dividends

First Business Financial Services pays an annual dividend of $0.52 per share and has a dividend yield of 2.3%. First Republic Bank pays an annual dividend of $0.68 per share and has a dividend yield of 0.8%. First Business Financial Services pays out 38.0% of its earnings in the form of a dividend. First Republic Bank pays out 16.0% 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 Republic Bank has raised its dividend for 4 consecutive years.

Earnings & Valuation

This table compares First Business Financial Services and First Republic Bank’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
First Business Financial Services $96.11 million 2.04 $14.90 million $1.37 16.35
First Republic Bank $2.38 billion 5.75 $673.42 million $4.24 20.43

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

Analyst Ratings

This is a breakdown of current ratings and price targets for First Business Financial Services and First Republic Bank, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
First Business Financial Services 0 1 0 0 2.00
First Republic Bank 0 9 5 0 2.36

First Business Financial Services presently has a consensus target price of $25.00, indicating a potential upside of 11.61%. First Republic Bank has a consensus target price of $103.07, indicating a potential upside of 18.99%. Given First Republic Bank’s stronger consensus rating and higher probable upside, analysts clearly believe First Republic Bank is more favorable than First Business Financial Services.

Institutional and Insider Ownership

58.9% of First Business Financial Services shares are owned by institutional investors. Comparatively, 98.8% of First Republic Bank shares are owned by institutional investors. 6.6% of First Business Financial Services shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Summary

First Republic Bank beats First Business Financial Services on 14 of the 17 factors compared between the two stocks.

About First Business Financial Services

First Business Financial Services, Inc. (FBFS) is a bank holding company. The Company engages in the commercial banking business through its bank subsidiaries, which include First Business Bank (FBB), First Business Bank-Milwaukee (FBB-Milwaukee) and Alterra Bank (Alterra) (FBB and FBB-Milwaukee and, together with FBB, the Banks). The operations of FBFS are conducted through the Banks and certain subsidiaries of FBB. The Banks operate as business banks focusing on delivering a line of commercial banking products, including commercial loans and commercial real estate loans, and services to meet the needs of small- and medium-sized businesses, business owners, executives, professionals and high net worth individuals. Its business lines include commercial lending, asset-based financing, equipment financing, small business administration (SBA) lending, treasury management services, and trust and investment services. Its investments include short-term investments and securities.

About First Republic Bank

First Republic Bank is a commercial bank and trust company. The Bank specializes in providing services, including private banking, private business banking, real estate lending and wealth management services, including trust and custody services, to clients in selected metropolitan areas in the United States. It operates through two segments: Commercial Banking and Wealth Management. The Commercial Banking segment is engaged in attracting funds from the public; originating loans, primarily real estate secured mortgage loans, and investing in investment securities. The Wealth Management segment consists of First Republic Investment Management, Inc.; its money market mutual fund activities through third-party providers and the brokerage activities of First Republic Securities Company, LLC; First Republic Trust Company and First Republic Trust Company of Delaware LLC (the Trust Company), and its foreign exchange activities. It offers a range of internally managed investment services.

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