City (CHCO) and Hanmi Financial (HAFC) Financial Analysis

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City (NASDAQ:CHCO) and Hanmi Financial (NASDAQ:HAFC) are both small-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, valuation, dividends, profitability, analyst recommendations, institutional ownership and risk.

Volatility and Risk

City has a beta of 0.7, indicating that its share price is 30% less volatile than the S&P 500. Comparatively, Hanmi Financial has a beta of 0.94, indicating that its share price is 6% less volatile than the S&P 500.

Profitability

This table compares City and Hanmi Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
City 31.58% 15.11% 1.77%
Hanmi Financial 22.82% 10.92% 1.16%

Institutional & Insider Ownership

69.3% of City shares are held by institutional investors. Comparatively, 89.7% of Hanmi Financial shares are held by institutional investors. 3.8% of City shares are held by insiders. Comparatively, 2.7% of Hanmi Financial shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings for City and Hanmi Financial, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
City 0 2 1 0 2.33
Hanmi Financial 0 3 0 0 2.00

City presently has a consensus price target of $77.00, suggesting a potential upside of 12.16%. Hanmi Financial has a consensus price target of $25.50, suggesting a potential upside of 23.19%. Given Hanmi Financial’s higher probable upside, analysts clearly believe Hanmi Financial is more favorable than City.

Dividends

City pays an annual dividend of $2.12 per share and has a dividend yield of 3.1%. Hanmi Financial pays an annual dividend of $0.96 per share and has a dividend yield of 4.6%. City pays out 53.8% of its earnings in the form of a dividend. Hanmi Financial pays out 53.0% 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. City has raised its dividend for 7 consecutive years and Hanmi Financial has raised its dividend for 5 consecutive years. Hanmi Financial is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares City and Hanmi Financial’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
City $206.54 million 5.12 $54.31 million $3.94 17.42
Hanmi Financial $242.74 million 2.71 $54.66 million $1.81 11.44

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

Summary

City beats Hanmi Financial on 10 of the 17 factors compared between the two stocks.

City Company Profile

City Holding Company operates as a holding company for City National Bank of West Virginia that provides various banking, trust and investment management, and other financial solutions in the United States. The company accepts various deposit products, such as checking, savings, and money market accounts, as well as certificates of deposit and individual retirement accounts. It also provides commercial and industrial loans that consist of loans to corporate and other legal entity borrowers primarily in small to mid-size industrial and commercial companies; commercial real estate loans comprising commercial mortgages, which are secured by nonresidential and multi-family residential properties; residential real estate loans to consumers for the purchase or refinance of a residence; first-lien home equity loans; consumer loans that are secured and unsecured by automobiles, boats, recreational vehicles, certificates of deposit, and other personal property; and demand deposit account overdrafts. In addition, the company offers mortgage banking services, including fixed and adjustable-rate mortgages, construction financing, production of conventional and government insured mortgages, secondary marketing, and mortgage servicing. Further, it provides deposit services for commercial customers comprising treasury management, lockbox, and other cash management services; merchant credit card services; wealth management, trust, investment, and custodial services for commercial and individual customers; and corporate trust and institutional custody, financial and estate planning, and retirement plan services, as well as automated-teller-machine, interactive-teller-machine, mobile banking, and debit card services. As of January 31, 2018, the company operated through a network of 86 branches in West Virginia, Virginia, Kentucky, and Ohio. City Holding Company was founded in 1957 and is headquartered in Charleston, West Virginia.

Hanmi Financial Company Profile

Hanmi Financial Corporation operates as the holding company for Hanmi Bank that provides business banking products and services in the United States. The company offers various deposit products, including noninterest-bearing checking accounts, interest-bearing checking and savings accounts, negotiable order of withdrawal accounts, money market accounts, and certificates of deposit. It also provides real estate loans, including commercial property, construction, and residential property loans; and commercial and industrial loans, such as commercial term loans and commercial lines of credit, as well as international finance, and trade services and products comprising letters of credit, and import and export financing. In addition, the company offers consumer loans that include automobile loans, secured and unsecured personal loans, home improvement loans, home equity lines of credit, unsecured lines of credit, and credit cards; and small business administration loans for business purposes, which comprise owner-occupied commercial real estate, business acquisitions, start-ups, franchise financing, working capital, improvements and renovations, inventory and equipment, and debt-refinancing, as well as equipment lease financing. As of January 25, 2018, it operated a network of 40 full-service branches and 8 loan production offices in California, Texas, Illinois, Virginia, New Jersey, New York, Colorado, Washington, and Georgia. The company was founded in 2000 and is headquartered in Los Angeles, California.

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