Western Alliance Bancorporation (NYSE:WAL) vs. Heritage Commerce (NASDAQ:HTBK) Critical Contrast

Heritage Commerce (NASDAQ:HTBK) and Western Alliance Bancorporation (NYSE:WAL) are both finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their analyst recommendations, earnings, institutional ownership, risk, valuation, dividends and profitability.

Insider and Institutional Ownership

75.6% of Heritage Commerce shares are owned by institutional investors. Comparatively, 79.2% of Western Alliance Bancorporation shares are owned by institutional investors. 2.7% of Heritage Commerce shares are owned by company insiders. Comparatively, 2.8% of Western Alliance Bancorporation shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Volatility and Risk

Heritage Commerce has a beta of 0.8, indicating that its share price is 20% less volatile than the S&P 500. Comparatively, Western Alliance Bancorporation has a beta of 1.34, indicating that its share price is 34% more volatile than the S&P 500.

Profitability

This table compares Heritage Commerce and Western Alliance Bancorporation’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Heritage Commerce	17.77%	8.10%	1.02%
Western Alliance Bancorporation	18.04%	13.33%	1.10%

Earnings and Valuation

This table compares Heritage Commerce and Western Alliance Bancorporation”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Heritage Commerce	$269.09 million	2.86	$47.83 million	$0.78	16.09
Western Alliance Bancorporation	$5.37 billion	1.82	$787.70 million	$8.09	10.97

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

Analyst Recommendations

This is a summary of current ratings and recommmendations for Heritage Commerce and Western Alliance Bancorporation, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Heritage Commerce	0	6	2	0	2.25
Western Alliance Bancorporation	1	2	11	0	2.71

Heritage Commerce presently has a consensus target price of $12.25, suggesting a potential downside of 2.39%. Western Alliance Bancorporation has a consensus target price of $103.13, suggesting a potential upside of 16.19%. Given Western Alliance Bancorporation’s stronger consensus rating and higher probable upside, analysts plainly believe Western Alliance Bancorporation is more favorable than Heritage Commerce.

Dividends

Heritage Commerce pays an annual dividend of $0.52 per share and has a dividend yield of 4.1%. Western Alliance Bancorporation pays an annual dividend of $1.68 per share and has a dividend yield of 1.9%. Heritage Commerce pays out 66.7% of its earnings in the form of a dividend. Western Alliance Bancorporation pays out 20.8% 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. Western Alliance Bancorporation has raised its dividend for 5 consecutive years.

Summary

Western Alliance Bancorporation beats Heritage Commerce on 14 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 Western Alliance Bancorporation

Western Alliance Bancorporation operates as the bank holding company for Western Alliance Bank that provides various banking products and related services primarily in Arizona, California, and Nevada. It operates through Commercial and Consumer Related segments. The company offers deposit products, including checking, savings, and money market accounts, as well as fixed-rate and fixed maturity certificates of deposit accounts; demand deposits; and treasury management and residential mortgage products and services. It also provides commercial and industrial loan products, such as working capital lines of credit, loans to technology companies, inventory and accounts receivable lines, mortgage warehouse lines, equipment loans and leases, and other commercial loans; commercial real estate loans, which are secured by multi-family residential properties, professional offices, industrial facilities, retail centers, hotels, and other commercial properties; construction and land development loans for single family and multi-family residential projects, industrial/warehouse properties, office buildings, retail centers, medical office facilities, and residential lot developments; and consumer loans. In addition, the company provides other financial services, such as internet banking, wire transfers, electronic bill payment and presentment, funds transfer and other digital payment offerings, lock box services, courier, and cash management services. Further, the company holds certain investment securities, municipal and non-profit loans, and leases; invests primarily in low-income housing tax credits and small business investment corporations; and holds certain real estate loans and related securities. Western Alliance Bancorporation was founded in 1994 and is headquartered in Phoenix, Arizona.