Contrasting Heritage Commerce (NASDAQ:HTBK) and East West Bancorp (NASDAQ:EWBC)

Heritage Commerce (NASDAQ:HTBK) and East West Bancorp (NASDAQ:EWBC) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their analyst recommendations, earnings, risk, dividends, profitability, institutional ownership and valuation.

Volatility and Risk

Heritage Commerce has a beta of 0.81, suggesting that its share price is 19% less volatile than the S&P 500. Comparatively, East West Bancorp has a beta of 0.92, suggesting that its share price is 8% less volatile than the S&P 500.

Earnings and Valuation

This table compares Heritage Commerce and East West Bancorp”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Heritage Commerce	$189.76 million	3.94	$40.53 million	$0.70	17.44
East West Bancorp	$4.53 billion	3.48	$1.17 billion	$9.07	12.64

East West Bancorp has higher revenue and earnings than Heritage Commerce. East West Bancorp is trading at a lower price-to-earnings ratio than Heritage Commerce, indicating that it is currently the more affordable of the two stocks.

Dividends

Heritage Commerce pays an annual dividend of $0.52 per share and has a dividend yield of 4.3%. East West Bancorp pays an annual dividend of $2.40 per share and has a dividend yield of 2.1%. Heritage Commerce pays out 74.3% of its earnings in the form of a dividend. East West Bancorp pays out 26.5% 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. East West Bancorp has increased its dividend for 8 consecutive years.

Profitability

This table compares Heritage Commerce and East West Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Heritage Commerce	16.31%	7.18%	0.90%
East West Bancorp	27.16%	15.55%	1.63%

Analyst Ratings

This is a summary of recent ratings and recommmendations for Heritage Commerce and East West Bancorp, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Heritage Commerce	0	1	4	1	3.00
East West Bancorp	1	3	11	1	2.75

Heritage Commerce currently has a consensus price target of $11.50, suggesting a potential downside of 5.81%. East West Bancorp has a consensus price target of $124.69, suggesting a potential upside of 8.75%. Given East West Bancorp’s higher possible upside, analysts plainly believe East West Bancorp is more favorable than Heritage Commerce.

Insider & Institutional Ownership

75.6% of Heritage Commerce shares are owned by institutional investors. Comparatively, 89.5% of East West Bancorp shares are owned by institutional investors. 2.7% of Heritage Commerce shares are owned by insiders. Comparatively, 1.0% of East West Bancorp shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Summary

East West Bancorp beats Heritage Commerce on 12 of the 17 factors compared between the two stocks.

About Heritage Commerce

Heritage Commerce Corp operates as the bank holding company for Heritage Bank of Commerce that provides various commercial and personal banking services to residents and the business/professional community in California. Its deposit products for business banking and retail markets include interest and non-interest-bearing demand, savings, and money market accounts, as well as certificates of deposit and time deposits. The company’s loan portfolio comprises commercial loans, such as operating secured and unsecured loans advanced for working capital, equipment purchases, and other business purposes; commercial real estate loans; commercial construction loans for rental properties, commercial buildings, and homes; small business administration loans; home equity lines of credit; multifamily loans on residential properties; residential mortgage loans; and consumer loans consisting of loans for financing automobiles, various consumer goods, and other personal purposes. In addition, it offers other banking services, including cashier’s checks, bank by mail, night depositories, safe deposit boxes, direct deposit, automated payroll, electronic funds transfer, online bill pay, homeowner association, remote deposit capture, automated clearing house origination, electronic data interchange, and check imaging services, as well as other customary banking, factoring financing, and electronic banking services. Heritage Commerce Corp was founded in 1994 and is headquartered in San Jose, California.

About East West Bancorp

East West Bancorp, Inc. operates as the bank holding company for East West Bank that provides a range of personal and commercial banking services to businesses and individuals in the United States. The company operates through three segments: Consumer and Business Banking, Commercial Banking, and Other. It accepts various deposit products, such as personal and business checking and savings accounts, money market, and time deposits. The company’s loan products include mortgage and home equity, commercial and residential real estate, working capital lines of credit, construction finance, trade finance, letters of credit, commercial business, affordable housing loans, asset-based lending, asset-backed finance, project finance, loan syndication, and equipment financing, as well as financing services for clients to facilitate their business transactions between the United States and Asia. It also provides various wealth management, treasury management, foreign exchange, and interest rate and commodity risk hedging services; and mobile and online banking services. The company was founded in 1973 and is headquartered in Pasadena, California.