Financial Contrast: Investar (NASDAQ:ISTR) versus Prosperity Bancshares (NYSE:PB)

Investar (NASDAQ:ISTR) and Prosperity Bancshares (NYSE:PB) are both finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their valuation, dividends, institutional ownership, profitability, analyst recommendations, earnings and risk.

Dividends

Investar pays an annual dividend of $0.40 per share and has a dividend yield of 2.5%. Prosperity Bancshares pays an annual dividend of $2.24 per share and has a dividend yield of 3.2%. Investar pays out 22.3% of its earnings in the form of a dividend. Prosperity Bancshares pays out 51.6% 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. Prosperity Bancshares has raised its dividend for 26 consecutive years. Prosperity Bancshares is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk and Volatility

Investar has a beta of 0.78, meaning that its share price is 22% less volatile than the S&P 500. Comparatively, Prosperity Bancshares has a beta of 0.91, meaning that its share price is 9% less volatile than the S&P 500.

Earnings and Valuation

This table compares Investar and Prosperity Bancshares’ gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Investar	$79.24 million	2.01	$16.68 million	$1.79	9.06
Prosperity Bancshares	$1.09 billion	6.15	$419.32 million	$4.34	16.09

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

Analyst Recommendations

This is a summary of current recommendations and price targets for Investar and Prosperity Bancshares, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Investar	0	0	2	0	3.00
Prosperity Bancshares	0	3	9	1	2.85

Investar currently has a consensus price target of $16.75, indicating a potential upside of 3.27%. Prosperity Bancshares has a consensus price target of $74.81, indicating a potential upside of 7.10%. Given Prosperity Bancshares’ higher probable upside, analysts plainly believe Prosperity Bancshares is more favorable than Investar.

Profitability

This table compares Investar and Prosperity Bancshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Investar	10.04%	6.76%	0.53%
Prosperity Bancshares	25.10%	6.32%	1.15%

Institutional & Insider Ownership

50.2% of Investar shares are owned by institutional investors. Comparatively, 80.7% of Prosperity Bancshares shares are owned by institutional investors. 8.7% of Investar shares are owned by company insiders. Comparatively, 4.3% of Prosperity Bancshares shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Summary

Prosperity Bancshares beats Investar on 14 of the 18 factors compared between the two stocks.

About Investar

Investar Holding Corporation operates as the bank holding company for Investar Bank that provides a range of commercial banking products to individuals, professionals, and small to medium-sized businesses in south Louisiana, southeast Texas, and Alabama in the United States. The company offers various deposit products and services, such as savings, checking, money market, and individual retirement accounts, as well as various certificates of deposit; debit and credit cards; internet, mobile, and video banking services; and reciprocal deposit products. It also provides commercial real estate loans; commercial and industrial loans, including working capital lines of credit and equipment loans; loans for the construction of commercial projects, and single family residential and multifamily properties; one-to-four family residential real estate loans, such as second mortgage loans; and consumer loans, such as secured and unsecured installment and term loans, home equity loans and lines of credit, and auto loans, as well as loans for personal, family, and household purposes. In addition, the company offers treasury management products, including remote deposit capture, lockbox payment processing, virtual vault, positive pay, ACH origination, wire transfer, investment sweep accounts, and business internet banking services. Further, it provides various other banking services, such as cashiers' checks, direct deposit of payroll and social security checks, night depository, bank-by-mail, automated teller machines, electronic statements, interactive teller machines, online account opening, and mobile wallet payment services. Investar Holding Corporation was founded in 2006 and is headquartered in Baton Rouge, Louisiana.

About Prosperity Bancshares

Prosperity Bancshares, Inc. operates as bank holding company for the Prosperity Bank that provides financial products and services to businesses and consumers. It accepts various deposit products, such as demand, savings, money market, and time accounts, as well as and certificates of deposit. The company also offers 1-4 family residential mortgage, commercial real estate and multifamily residential, commercial and industrial, agricultural, and non-real estate agricultural loans, as well as construction, land development, and other land loans; consumer loans, including automobile, recreational vehicle, boat, home improvement, personal, and deposit account collateralized loans; term loans and lines of credit; and consumer durables and home equity loans, as well as loans for working capital, business expansion, and purchase of equipment and machinery. In addition, it provides internet banking, mobile banking, trust and wealth management, retail brokerage, mortgage services, and treasury management, as well as debit and credit cards. The company was incorporated in 1983 and is headquartered in Houston, Texas.