OceanFirst Financial (NASDAQ:OCFC) and First Defiance Financial (NASDAQ:FDEF) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, valuation, risk, earnings, dividends, profitability and analyst recommendations.

Dividends

OceanFirst Financial pays an annual dividend of $0.60 per share and has a dividend yield of 2.4%. First Defiance Financial pays an annual dividend of $0.68 per share and has a dividend yield of 2.6%. OceanFirst Financial pays out 35.3% of its earnings in the form of a dividend. First Defiance Financial pays out 38.9% 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. OceanFirst Financial has increased its dividend for 4 consecutive years and First Defiance Financial has increased its dividend for 5 consecutive years. First Defiance Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional and Insider Ownership

73.8% of OceanFirst Financial shares are owned by institutional investors. Comparatively, 33.4% of First Defiance Financial shares are owned by institutional investors. 3.8% of OceanFirst Financial shares are owned by company insiders. Comparatively, 3.1% of First Defiance Financial shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares OceanFirst Financial and First Defiance Financial’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
OceanFirst Financial $215.90 million 5.58 $42.47 million $1.70 14.66
First Defiance Financial $148.18 million 3.62 $32.26 million $1.75 15.02

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

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for OceanFirst Financial and First Defiance Financial, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
OceanFirst Financial 0 0 5 0 3.00
First Defiance Financial 0 2 0 0 2.00

OceanFirst Financial presently has a consensus price target of $34.00, indicating a potential upside of 36.38%. First Defiance Financial has a consensus price target of $32.50, indicating a potential upside of 23.62%. Given OceanFirst Financial’s stronger consensus rating and higher possible upside, equities research analysts plainly believe OceanFirst Financial is more favorable than First Defiance Financial.

Volatility and Risk

OceanFirst Financial has a beta of 0.5, indicating that its stock price is 50% less volatile than the S&P 500. Comparatively, First Defiance Financial has a beta of 0.73, indicating that its stock price is 27% less volatile than the S&P 500.

Profitability

This table compares OceanFirst Financial and First Defiance Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
OceanFirst Financial 19.35% 9.49% 1.21%
First Defiance Financial 27.15% 11.51% 1.45%

Summary

OceanFirst Financial beats First Defiance Financial on 10 of the 17 factors compared between the two stocks.

OceanFirst Financial Company Profile

OceanFirst Financial Corp. operates as the holding company for OceanFirst Bank N.A. that provides a range of community banking services. The company offers various deposit products to retail, government, and business customers, including money market accounts, savings accounts, interest-bearing checking accounts, non-interest-bearing accounts, and time deposits. It also provides commercial real estate, multi-family mortgage, and land loans; fixed-rate and adjustable-rate mortgage loans that are secured by one-to-four family residences; consumer loans, such as home equity loans and lines of credit, overdraft line of credit, loans on savings accounts, and other consumer loans; and commercial and industrial loans, and lines of credit. In addition, the company invests in mortgage-backed securities, securities issued by the U.S. Government and agencies, corporate securities, and other investments. Further, it offers bankcard and wealth management services; and sells alternative investment products and life insurance products. The company operates through an administrative/branch office located in Toms River, New Jersey; and 45 additional branch offices and 3 deposit production facilities in central and southern New Jersey, as well as operates a wealth management office in Ocean County, and commercial loan production offices in the Philadelphia area and Atlantic, Cape May, and Mercer Counties in New Jersey. OceanFirst Financial Corp. was founded in 1902 and is based in Toms River, New Jersey.

First Defiance Financial Company Profile

First Defiance Financial Corp. operates as a unitary thrift holding company that provides community-based financial services in northwest Ohio, northeast Indiana, and southeastern Michigan. It offers checking accounts, money market accounts, savings accounts, term certificate accounts, and certificates of deposit, as well as Certificate of Deposit Account Registry Service; and consumer finance, 1-4 family residential real estate, commercial real estate, construction, consumer, commercial, and home equity and improvement loans. The company also offers trust and wealth management services, as well as online banking services. In addition, it sells various property and casualty, group health and life, and individual health and life insurance products. The company operates through 43 full service banking centers, as well as 1 loan production office. First Defiance Financial Corp. was incorporated in 1995 and is headquartered in Defiance, Ohio.

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