Head-To-Head Comparison: Malaga Financial (OTCMKTS:MLGF) vs. Heritage Commerce (NASDAQ:HTBK)

Malaga Financial (OTCMKTS:MLGF) and Heritage Commerce (NASDAQ:HTBK) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their risk, institutional ownership, earnings, profitability, dividends, valuation and analyst recommendations.

Valuation and Earnings

This table compares Malaga Financial and Heritage Commerce”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Malaga Financial	N/A	N/A	$21.55 million	$2.24	9.69
Heritage Commerce	$197.46 million	4.20	$47.83 million	$0.78	17.24

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

Volatility and Risk

Malaga Financial has a beta of 0.08, meaning that its stock price is 92% less volatile than the S&P 500. Comparatively, Heritage Commerce has a beta of 0.69, meaning that its stock price is 31% less volatile than the S&P 500.

Institutional & Insider Ownership

1.1% of Malaga Financial shares are owned by institutional investors. Comparatively, 75.6% of Heritage Commerce shares are owned by institutional investors. 2.7% of Heritage Commerce shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of current recommendations and price targets for Malaga Financial and Heritage Commerce, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Malaga Financial	0	0	0	0	0.00
Heritage Commerce	0	5	2	0	2.29

Heritage Commerce has a consensus target price of $13.13, suggesting a potential downside of 2.42%. Given Heritage Commerce’s stronger consensus rating and higher probable upside, analysts clearly believe Heritage Commerce is more favorable than Malaga Financial.

Dividends

Malaga Financial pays an annual dividend of $1.00 per share and has a dividend yield of 4.6%. Heritage Commerce pays an annual dividend of $0.52 per share and has a dividend yield of 3.9%. Malaga Financial pays out 44.6% of its earnings in the form of a dividend. Heritage Commerce pays out 66.7% 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. Malaga Financial is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Malaga Financial and Heritage Commerce’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Malaga Financial	N/A	N/A	N/A
Heritage Commerce	17.77%	8.07%	1.01%

Summary

Heritage Commerce beats Malaga Financial on 12 of the 15 factors compared between the two stocks.

About Malaga Financial

Malaga Financial Corporation operates as the holding company for Malaga Bank that provides various community banking products and services to personal and business customers. It offers checking, savings, NOW, and money market accounts, certificates of deposits, business banking, consumer, and demand deposits. The company also provides commercial real estate, single and multi-family residential mortgage, consumer, 14-unit investment property, construction, personal, and business loans; home equity lines of credit; and certificates of deposit. In addition, it offers coupon redemption, direct deposit, overdraft lines of credit, telephone transfers, U.S. savings bond redemption, and wire transfer services; and ATM and VISA debit cards, bank by mail, medallion signature guarantee, night depository, notary, safe deposit boxes, and trust deed note collection services. Further, the company provides online banking services, including bill payer, e-statements, and mobile banking services. The company was incorporated in 2002 and is headquartered in Palos Verdes Estates, California.

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.